ABI Research whitepaper identifies the short-and long-term impacts the global pandemic will have on Augmented and Virtual Reality

The Coronavirus outbreak will cause manufacturing delays at the source and reduce the overall demand for Augmented Reality (AR) Smart glasses. At the same time, there will be a significant increase in demand on both the enterprise and consumer side as telepresence and content demand grows. The balance between these two will see 16 million AR & Virtual Reality (VR) head mounted display (HMD) shipments in 2021, maintaining the trajectory of the 3.5 million consumer AR shipments in 2024, states global tech market advisory firm, ABI Research.

“The coronavirus outbreak will cause temporary manufacturing and shipment delays, however the demand for consumer AR and VR devices and content has been increased due to home isolation, balancing initial drop in demand and financial losses for providers,” says Eleftheria Kouri, Research Analyst at ABI Research.

COVID-19 has affected most CE companies, especially in China, Taiwan, and South Korea. “As anticipated, COVID-19 has impacted the Augmented Reality (AR) and Virtual Reality (VR) market as well, causing temporary delays in AR/VR device production, increased costs, and revenue losses,” says Kouri. MAD Gaze, a Hong Kong based consumer AR smart glasses provider, has announced delays in shipments, and changed its display panel supplier from a Chinese factory to Korean and Japanese factories due to production delays in Chinese factories. Nreal, a China-based AR consumer smart glasses provider, announced production/ shipment delays as well. At the same time, bigger companies with higher demand and larger-scale supply chains face similar issues, such as Oculus, HTC, and Vive struggling to meet VR headset demand.

“In the short term, the delays in production and scheduled shipments, and potential decrease in demand will have a huge financial impact on AR/VR device manufacturers, generating reduced revenue and unexpected extra costs for employee salaries or for alternative suppliers. Also, delays and reduced funding series are expected, mainly affecting startups,” Kouri explains. Finally, delays are anticipated in AR/VR application development and upcoming upgrades due to the cancellation of developer conferences (Apple, Google, Facebook).

Long-term production and shipment delays will mainly affect smaller companies, especially those launching devices for first time in the market (like Nreal or small VR companies). Delays may encourage potential customers to purchase products from competitors and bigger companies that are supported by high-scale supply chains and product stocks. Moreover, continuous delays of product delivery will negatively affect user experience (even if the delays are caused by unexpected reasons). “The impact will be more significant on new companies/startups aiming to get established in the market and build a reliable brand name. Delays will also push roadmaps into the future and depending on how significant a reduction is in demand and manufacturing capabilities, some may be unable to last,” Kouri points out.

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The AR consumer market and smart glasses manufacturers are at a relatively lower risk in terms of losing potential customers and may not notice significantly reduced pre-orders/shipments, because AR consumer devices are not a high demand product at the current stage of the market, and the competition is still weak (consumers do not have range of options as in the VR or AR enterprise sector). “However, both AR and VR solutions can contribute to addressing challenges. AR/VR can be a useful tool to support/supplement online education courses (in regions where schools/universities are closed and rely on online learning (e.g., some schools in the United Arab Emirates (UAE)). Also, AR remote assistance applications or AR/VR training can be a valuable solution to avoid unnecessary travel, and hardware choice is less impactful on these use cases,” recommends Kouri.