AR/VR device shipments revised up to 14.19 million units in 2022, with an annual growth rate of 43.9%, according to TrendForce research. Growth momentum will come from increased demand for remote interactivity stemming from the pandemic, as well as Oculus Quest 2’s price reduction strategy. Microsoft HoloLens 2 and Oculus Quest 2 are first in market share for AR and VR, respectively.

According to TrendForce, the topic of the Metaverse has driven brands to actively plan for and stimulate product shipment performance. However, the AR/VR device market has yet to experienced explosive growth due to two factors: component shortages and the difficulty of developing new technologies. In addition, cosmetic and size considerations have made the more optically and technically difficult Pancake design the first choice for new high-end products. Furthermore, various embedded tracking feedback technologies key to enhancing the user’s immersive experience such as eye tracking and 6DoF further affect the development progress of a new product as a whole. Since there are no new foreboding products on the horizon, TrendForce believes, no other branded products have a chance at supplanting the current mainstream status of Oculus or Microsoft until at least 2023.

The Oculus Quest 2, which costs between US$200 and US$400, is currently the most popular AR/VR device in the consumer market. TrendForce expects Oculus to launch an advanced version of the Quest product within two years, reaching a hardware performance equivalent of US$700 or down to a retail price of US$500 with discounts. This product is expected to expand the size of the high-end consumer AR/VR market. The commercial market is dominated by the HoloLens 2 which costs more than US$1,000 and upwards of US$3,500. Since the commercial market places more emphasis on the benefits of hardware and software integration, manufacturers that dominate commercial systems, software, and platforms have the advantage. Thus, Apple has become another focus in the AR/VR device market.

Strong shipments of Oculus and Microsoft products will likely force Apple to release relevant products to join the competition this year. However, TrendForce states, considering hardware performance requirements and gross profit margins, Apple will likely target the commercial market and adopt the same pricing strategy as HoloLens, hardware priced in the thousands of dollars and a monthly subscription-based software solution. Overall, TrendForce believes that the launch of new products this year by Apple, Meta, and Sony may be delayed and will not add significant growth to the overall AR/VR market for the time being.

Sales of gaming consoles underwent palpable growth in 1H21 thanks to the release of new consoles as well as demand that had previously been deferred in 2020 due to material shortages. Moving into 2H21, however, disruptions in logistics/transportation and the further spread of the COVID-19 pandemic led to less-than-expected sales volumes during the holiday season, estimated in total annual sales of 51.257 million consoles for the whole 2021. While the Nintendo Switch remained the market leader with sales of 26.19 million units, about 14.31 million units of the Sony PS5 were sold, compared to 8.14 million units of the Microsoft Xbox Series X|S.

As the aforementioned issues related to the pandemic, logistics, and shortages gradually become resolved, TrendForce expects gaming console sales for 2022 to reach 57.94 million units, a 13% YoY increase. Although the Switch will likely retain its market leadership, sales will hold flat and begin to show signs of decline, as the console enters its fifth year. TrendForce expects Nintendo to release a refreshed version of the Switch console in early 2023 in response to gradually declining sales.

After expanding the PS5 user base, Sony is expected to make a heavy push for its next-gen VR products, the PS VR 2, which will likely be released at the end of 2022. At the same time, Sony will continue to strengthen the development of both games with VR content and VR-related accessories, which can further improve the gaming experience of PS VR users. Microsoft, on the other hand, has placed an emphasis on not only its Xbox Cloud Gaming streaming service, but also the acquisition of game development studios to increase its exclusive game titles, attract consumers, and weaken its competitors. Hence, Microsoft may potentially release its own affordably priced game streaming boxes this year to be used in conjunction with cloud-based game streaming services. However, due to the nature of Xbox Cloud Gaming as a cross-platform service compatible with, among other devices, the previous-gen Xbox One, consumers may in turn be less willing to purchase the Xbox Series X|S, thereby lowering annual sales of these consoles and widening the sales gap between the Series X|S and their competitors.

Switch-like handheld gaming consoles will continue to appear

Rising sales of the Nintendo Switch consoles have led other brands to release similar products in response. In addition, the barrier to entry in the handheld gaming console market has been significantly lowered now that Qualcomm is able to supply chips, reference designs, and dev tools. With brands now willing to cross over to this space, the market may see the emergence of multiple Switch-like handheld gaming consoles in 2022.

Unlike prevailing gaming consoles which have closed ecosystems, products such as the Steam Deck are based on open platforms that are compatible with gaming contents and streaming services available on PCs and mobile devices. As such, these handheld gaming consoles are not an absolute requirement for consuming game content, and consumers may still prefer using their existing PCs or mobile devices for such content.

As well, brands that look to release their own handheld gaming consoles will not look to compensate for reduced hardware profitability through software sales. As a result, these consoles will be priced relatively high, at an expected US$399 and up, which may negatively affect consumers’ willingness to purchase them. Even if certain brands make an attempt at handheld gaming console production, sales of these consoles are expected to remain mediocre, without making much of an impact on the current gaming console market.

（Image credit: Pixabay）