XR Market Led by Oculus Quest 2
The author is an analyst of NH Investment & Securities. He can be reached at kyuha.lee@nhqv.com. -- Ed.
VR device market growth stalled
Till recently, sales of VR devices had proved disappointing due to a variety of reasons, including: 1) complicated installation procedures; 2) the need to be connected to high-specification PCs for use; 3) expensive price tags (W1mn or higher); and 4) a lack of VR content. However, with the Covid-19 pandemic forcing people to spend more time indoors, demand side conditions for the AR device market have improved. And, the well-timed roll-outs of affordable standalone VR devices have finally moved the global VR-related market one step closer to a full-fledged growth phase.
In particular, Oculus’s Quest 2 has changed the landscape of the global VR device market. We note that Oculus is a subsidiary of social networking giant Facebook. Prior to the Oculus Quest series (Quest released in 2019), most VR devices remained as accessories of smartphones or game consoles, or had to be connected to high-end PCs. As such limited usage options for AR devices made it difficult to expand user bases, related content production also remained tepid.
Oculus Quest 2, an all-in-one VR device
However, the Quest 2 has offered some solutions to the pre-existing disadvantages of old VR devices, and thus, it has been well-received by consumers. We believe the great success of the Oculus Quest 2 is attributable to the following three reasons: 1) being a standalone VR device, there is no need to connect the gadget to other devices such as a PC; 2) equipped with high-specification H/W (eg, Snapdragon XR2, Qualcomm’s VR chip), the Quest 2 enables users to enjoy full-fledged immersive experiences while playing games; and 3) the device is also very affordable, with a starting price of only US$399 for the 64GB version.
Oculus Quest 2enjoying strong popularity
Even though the product was launched in late 2020 (October), global Oculus 2 sales in 2020 totaled 2.39mn units, representing 38.6% M/S of the global VR device market. In Korea, Oculus 2 began to be sold only from early-2021 by SK Telecom, and with all stock quickly sold out, some buyers have resorted to purchasing the product at a premium in the re-sale market.
Overview of today’s VR technologies
VR device market entering growth phase
We believe that the Oculus Quest 2 is a catalyst that has finally pushed the global VR market’s product life cycle from an introduction phase to a growth phase. Prior to the Quest 2, the VR market life cycle had long stayed in an introductory phase in which VR devices were used and enjoyed by only a limited number of enthusiasts. However, riding on the Covid-19 pandemic and metaverse boom, the VR market is believed to have entered a growth stage.
Three factors essential for higher VR penetration: 1) high-specification HW/SW; 2) sensing technology; and 3) user comfort
In our view, the following three factors are essential for VR devices to achieve wider penetration: 1) high-specification H/W and S/W that can create immersive computer-generated worlds by smoothly blurring the lines between VR and actual reality; 2)sensing technology that makes it possible for users to have a realistic experience in a virtual space through sophisticated and accurate location/motion detection; and 3) the creation of comfortable VR gadgets via weight reduction.
We point out that physical uneasiness has been cited as the biggest weakness of many VR gadgets by users. It is known that many users of VR devices have experienced serious eye strain or sickness after using the device for any significant period. Back in the 1990s, Sega decided not to release Sega VR, its VR headset, as it was unable to find solutions to such physical difficulties.
Motion sickness related to the use of VR headsets is caused mainly by two factors. Users of VR gadgets feel dizzy (even sick) when a VR device’s display refresh rate is lower than the human brain’s processing pace. However, most VR devices released recently boast average refresh rates of 90Hz. We note that playing old videos and games with 60Hz refresh rates can also cause users to feel dizzy. However, this should no longer be an issue, given that most new games and videos are produced at higher frame rates.
What is harder to address is the dizziness users feel when their physical movements in the real world diverge from their movements in the virtual world. For instance, with the manipulation of a joystick, a user may be able to turn his or her field of view to the right in a virtual world. However, as the user remains unmoved physically in the actual world, dizziness is a common result. One way to resolve this physical uneasiness is to have users turn their bodies in the real world. It should be said, however, that software upgrades have gone a long way in relieving related physical discomfort.
Significance of VR sensing technology – Breaking down lines between reality and VR
To maximize VR device users’sense of immersion, technologies are required to accurately recognize users’ surroundings and physical movements
To maximize a VR device user’s sense of immersion to an extent that blurs the lines between virtual and physical worlds, technologies are required to accurately detect a user’s surroundings and physical movements so that the user’s motion can be reflected in real time in virtual reality.
To make VR experiences more immersive for the user: 1) tethered VR devices (VR headsets with a connection cable linking the headset to a PC or console) require camera stands; and 2) standalone devices not needing a connection cable require built-in cameras and joysticks to recognize a user’s surroundings and physical movements.
A VR device’s sensing capability is measured in degrees of freedom (DoF), which refer to the number of ways a rigid object can move through three-dimensional space. There are six total DoF in the day-to-day world, which describe every possible movement of an object, with three for position (left-right, forward-backward, and up-down), and three for orientation (yaw, pitch, and roll). The majority of VR devices, except for low-end devices such as the Samsung Gear VR and Google Cardboard, support 6DoF experience. Of note, 6DoF devices can sense both rotational and directional movements, while 3DoF devices cannot.
Major VR devices sense surroundings and movements via cameras and infrared LED
Major VR devices, including the Oculus Quest 2, come with four to six cameras and inertial measurement units (IMUs) to allow 6DoF experience, and are capable of infrared LED-based tracking.
Additional camera modules and 3D ToF LiDAR modules to be required
Going forward, VR sensing technology should be further developed so as to recognize even facial expressions, thus allowing for more sophisticated virtual experiences. To this end, additional camera modules and 3D ToF LiDAR modules (which are expected to be used by Apple) will likely be required.
VR era already upon us, but AR era still some time away
AR devices still mainly used by experts
We are at the dawn of the VR era thanks to the success of the Oculus Quest 2, which has succeeding in overcoming some of the weaknesses of existing VR devices. But, it appears as though the AR era is still some way away due to difficulties in commercializing AR devices. While Google Glass and Microsoft’s HoloLens 2 are available in the market, they are mainly used for expert-level education.
Hardware design and lack of content make commercialization of AR devices difficult
There is still no AR devices that have been commercialized for general consumers, owing to the complexity of hardware design and a lack of technological prowess. AR devices, which usually come in the form of glasses, lack enough space to install the components required for high-performance displays. For this reason, Apple’s AR glasses are unlikely to hit the market until after 2025.
Long time needed for AR devices to hit the market
SEC has unveiled video clips for its Samsung AR Glasses and Samsung Glasses Lite, with the former being a wearable device capable of AR and holographic display, and the latter being an AR-dedicated wearable device. While no launch schedule is known yet, it will likely take some time for the gadgets to hit the market.