With the continuous upgrading of optical waveguide, heat dissipation, and control chips, AR will evolve into a higher degree of integration and more lightweight one-piece AR in the future.
According to a research report released by Zhongtai Securities, XR is a composite of VR/MR/AR, and both MR and AR can achieve perspective. MR uses video see-through (VST) based on camera and screen, while AR uses optical see-through (OST), which has a more realistic perspective effect and a lighter form, but a higher optical design difficulty. Considering the display effect and mass production cost, Xreal, Rokid, and other leading manufacturers still focus on the BB scheme of separable AR, while companies like Nreal and INMO gradually launch integrated AR with optical waveguide. According to IDC data, separable AR sales in China accounted for about 85% in 2023. As optical waveguide, heat dissipation, and control chips continue to be upgraded and mass produced, AR glasses will approach ordinary eyeglasses in form, and promote penetration and popularization in the C-end market. At the same time, AI models provide greater room for imagination for AR ecological applications, and hardware and ecology resonate with each other, which may bring a new round of growth to the AR industry.
Zhongtai Securities' main points are as follows:
Hardware and ecological resonance may bring new growth to the AR industry.
In 2012, Google released its first AR glasses Google Glass, marking the real development of the AR industry. The market expectation and investment enthusiasm were high. However, due to factors such as the form, display effect, and ecological application of AR glasses, the overall development is relatively below expectations. From 2016 to 2019, the industry experienced a low period. But leading manufacturers like Google and Microsoft continue to update and iterate their hardware and software. Since 2019, new products such as Rokid, Xreal, and Magic Leap have been launched one after another, and the hardware ecology continues to improve, leading to the recovery and development of the AR industry. With the continuous iteration and mass production of optical waveguide technology, the form of AR glasses will approach ordinary glasses, driving the penetration and popularization of the C-end market. At the same time, AI large models also bring greater imagination space for AR ecological applications. The resonance of hardware and ecology may bring a new round of growth to the AR industry.
The AR sales volume is still low. In the next 2-3 years, it is expected to welcome a turning point in demand.
Sales volume: In recent years, the overall AR sales volume has steadily increased. The global sales volume of AR will reach 510,000 units in 2023, with a YoY growth of 21%. The domestic and overseas sales volumes are 200,000 and 310,000 units, respectively, with YoY growth rates of 54% and 29%, respectively. At present, the sales volume of AR is still low. With the iterative upgrading of AR glasses' hardware and AI application, lighter, smarter and better display effect consumer-grade AR glasses are expected to be introduced in the next 2-3 years, bringing a turning point in industry demand. According to Wellsenn XR's prediction, the global sales volume of AR glasses is expected to reach 5 million units in 2027, and the CAGR from 2023 to 2027 is as high as 77%.
From the sales volume perspective, domestic manufacturers that mainly promote consumer-grade AR occupy the dominant position in the global AR market at present. Overseas AR manufacturers such as Microsoft and Google mainly target the B-end market. According to the IDC data, global AR market share in 2023 is expected to be 45% for Xreal, 14% for Rokid, 13% for Nreal, and 6% for INMO.
At present, separable AR is the main form, and it will evolve into integrated AR with higher degree of integration and more lightweight in the future.
Separable AR: The processor, storage, battery and other components are separated from the glasses body and need to be connected to external devices such as mobile phones, computers, and host boxes to be used. It can solve the interaction and content ecology problems of some AR glasses, and has better endurance and heat dissipation performance. However, there are also some shortcomings such as transmission delay, insufficient portability, and relatively heavy glasses body. Because separable AR generally adopts the Birdbath scheme, the glasses body is relatively cumbersome.
Integrated AR: The processor, storage, battery and other components are integrated in the glasses, which can be used independently. It generally adopts the optical waveguide scheme, with significantly reduced volume and weight, and stronger wearability. However, there is still room for improvement in performance, heat dissipation, and endurance.
Investment suggestion: AR is the best carrier for AI landing. The hardware and ecology drive the development of the industry. It is recommended to pay attention to core targets of the industry chain such as Crystal-Optech (002273.SZ) (optical waveguide/optical module), Goertek Inc.(002241.SZ) (integrated hardware/optics/acoustics, etc.), Sunny Optical Technology Group Co., Ltd. (02382) (optical/camera/whole solution), Zhejiang Lante Optics Co., Ltd. (688127.SH) (glass wafer), Will Semiconductor Co., Ltd. (603501.SH) (LCOS/camera CIS chip), SVG Tech Group Ltd. (300331.SZ) (optical waveguide), Luxshare Precision Industry Co., Ltd. (002475.SZ) (whole machine assembly), Lingyi iTech (002600.SZ) (heat dissipation/whole machine assembly), etc.
Risk warning: The upgrading of AR hardware technology may not be as expected; the development of AI may not be as expected; the competition in the industry may intensify. The public information used in the research report may have the risk of information lag or inadequate updating.