AR/VR headsets to see slow growth in 2023

Worldwide augmented reality and virtual reality (AR/VR) headset shipments declined for the fourth quarter in a row as volumes fell 44.6% year over year during the second quarter of 2023 (2Q23), according to new data from the International Data Corporation (IDC) Worldwide Quarterly Augmented and Virtual Reality Headset Tracker. Downward pressure from the global economy has curbed demand while the negative impact of a price hike on the popular Quest 2 headset combined with aging hardware from multiple vendors to further hobble growth in this market.

The lull in the market doesn’t come as a surprise given the economic downturn and the small pool of suppliers for both AR and VR headsets. In fact, 2023 volumes are shaping up to be only slightly higher than 2017 with 8.5 million headsets expected to ship this year. However, a lot has changed in the past few years as standalone headsets have had a compound annual growth rate (CAGR) of 57.5% while screenless viewers such as Samsung’s Gear VR have essentially disappeared from the market.

“Over the past several years, Meta and Qualcomm have dramatically improved the AR/VR landscape, allowing the industry to move beyond simple phone-based VR to standalone headsets that have paved the way for VR gaming and numerous enterprise use cases,” said Jitesh Ubrani, research manager, Mobility and Consumer Device Trackers at IDC. “However, more companies have skin in the game as Sony along with MediaTek and Apple have joined the race to enable next generation experiences and potentially bring AR and VR technologies to an even larger market.”

Meta’s status as the market leader has not changed as the company held 50.2% market share during the quarter. However, the company does face a challenge from Sony (27.1% market share) and ByteDance (9.6% share), each of which gained share in 2Q23. Rounding out the top 5 were Xreal (formerly Nreal) and DPVR, each of which had slightly more than 2% share.

While 2023 will be another year of decline for AR/VR headset shipments, IDC forecasts the market to rebound in 2024, growing 46.8% year over year thanks to new hardware from Meta and ByteDance, the introduction of Apple’s Vision Pro, and the growing presence of smaller companies. By 2027, the market is expected to reach 30.3 million units globally.

“The ARVR market is at a critical point in its short history,” said Ramon T. Llamas, research director for Mobile Devices and AR/VR at IDC. “Apple’s entry next year will bring much needed attention to a small market, but it will also force other companies to compete in different ways. For some, it means meeting Apple head-to-head with similar features and applications. For others, it means guarding their specific market segments. In some cases, it will be both. Still, this will provide users with greater choice and comparison, and eventually the definition for best-of-breed will take on new meaning going forward.”

IDC