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Global XR headset shipments decline by 19% YoY in 2023

Global Extended Reality (XR) headset shipments dropped 19% YoY in 2023, according to Counterpoint’s Global XR (AR & VR Headsets) Model Tracker. The decline was caused by the absence of compelling new XR headsets as well as a lack of attractive and engaging use cases beyond gaming. However, the launch of the highly anticipated Sony PlayStation VR2 (PSVR2) and Meta Quest 3 during the year helped mitigate a steeper decline in 2023.

Meta captured 59% of total global XR headset shipments in 2023, down from 77% in 2022. This was mainly due to strengthened competition from Sony’s latest PSVR2. Meta’s shipment volume also declined by 38% YoY in 2023. However, Meta continued to dominate the XR market in 2023. Notably, Meta strategically lowered the price of its existing Quest 2 throughout the year, making it an attractive option for budget-conscious consumers, especially during the holiday season. This strategy helped Meta maintain its lead until the launch of Quest 3 in Q4 2023.

Global XR Headset Shipment Annual Change, 2023 vs 2022

Meta’s Quest 3, which was launched in October, emerged as the best-selling XR headset in Q4 2023 as it captured over half of the volume. Launched three years after its predecessor, the Quest 3 features several key enhancements, including much-improved video passthrough technology, which added to its mixed reality (MR) capabilities previously offered in the enterprise-grade Quest Pro.

However, the Quest 3’s launch-quarter shipments were 33% lower than during the Quest 2’s launch quarter. The higher price point of the Quest 3, along with the continued availability of the Quest 2 and competition from other headsets contributed to the decrease in shipments for the latest model.

Global XR Headset Shipment Share by Top Brands, 2023 vs 2022

Sony performed well in 2023 and secured the second position in the XR market helped by the successful launch of the PSVR2. PSVR2’s first-quarter sales exceeded those of its predecessor, the first-generation PSVR. However, it did not quite meet the level of anticipation generated during the pre-launch. Despite being equipped with advanced technologies for a next-level immersive experience, the PSVR2 faces challenges related to affordability and the lack of backward compatibility with PSVR games.

Gaming is currently the single most prominent use case that drives most of the XR headset volumes. However, it is limited by the available technology, which continues to present challenges like motion sickness. Additionally, issues, such as the bulky form factor and noticeable lag, prevent adoption by serious gamers. Developers are still figuring out what works best in this medium. Some headset makers, such as Pico, tried to pivot streaming as a use case. However, high entry barriers related to content production costs, as well as a skill gap, limited even an initial take-off of streaming as a serious use case.

However, engaging content remains one of the primary keys that could unlock greater XR adoption. The entry of major smartphone players in the segment could accelerate content production in the coming years. Particularly, Apple’s entry with the Vision Pro will contribute to greater content and use case development, as well as attract other players to enter the segment. Therefore, while we expect the market to grow slowly, OEMs will likely enter just to be part of the game, as XR is viewed by many as an eventual potential successor to smartphones. Counterpoint Research

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