According to the Zhitong Finance APP, CIB International released a research report stating that breakthroughs in hardware technology and edge AI driving will solve the difficulties of mass production and insufficient user demand that limit the development of AR glasses. With the help of edge agents, AR glasses can achieve real-time collection and feedback of information about things in the environment, and the interaction is more direct and natural. Compared with the current computation input and output methods, it has better experience and convenience advantages, and may become the next generation computing platform. Meta's first-generation AR glasses in 2025 can be compared to the iPhone 1 in the era of smartphones, initially unifying the product form of AR glasses; Apple's first-generation AR glasses in 2027 can be compared to the iPhone 4, driving the industry into a high-speed development stage.

The main viewpoints of CICC are as follows:

AR glasses have the potential to become a new consumer electronics hardware product with a scale of 1 billion units.

AR glasses refer to a new type of consumer electronics product that combines AR display and glasses form. After several years of iteration, the current market can be divided into three major categories: light smart glasses, video glasses, and full-function AR glasses. Considering the market space (user acceptance) of glasses and the prospect of AR glasses replacing smartphones, AR glasses are a product form with a scale of 1-1.4 billion units.

AR glasses have functions similar to smartphones and, with the help of edge agents, have the potential to become the next generation platform-level hardware.

AR glasses can provide large screen/multi-screen display capabilities and provide differentiated features such as the first-person user perspective and hands-free operation, which can largely replace the functions of smartphones and improve efficiency. With the help of edge agents, AR glasses can achieve real-time collection and feedback of information about things in the environment, and the interaction is more direct and natural. Compared with the current computation input and output methods, it has better experience and convenience advantages, and may become the next generation computing platform. Unlike the VR/MR industry, AR glasses only require relatively light applications, without the need for heavy applications like VR/MR. The difficulty of content production is lower and the production cycle is much shorter, so it is relatively easy to build the ecosystem.

Hardware technology is the biggest bottleneck in the development of AR glasses, and it is gradually facing breakthroughs.

Most AR glasses can reuse the smartphone supply chain, and the innovation lies in the SoC, microdisplay optics, and optics, which are also the main parts of the cost of AR glasses. In terms of SoC, there are currently few dedicated AR glasses SoCs. Based on Qualcomm's two-generation AR platform products, miniaturization, low power consumption, and distributed architecture may become important trends. In terms of microdisplay optics, MicroLED has all-round advantages such as small size, low power consumption, and high brightness, but it faces cost and mass production challenges. LCoS is the best choice in the short term. With the mass production of single-chip full-color MicroLED, its penetration rate will quickly increase. In terms of waveguides, in the short term, 2D geometric waveguides with large FOV and excellent display quality will prevail. In the medium term, both 2D geometric waveguides and etched surface relief grating waveguides are expected to win, depending on their respective mass production progress and cost reduction speed. In the long term, volume holographic gratings may become the best solution due to cost advantages.

Looking forward to the future, leading manufacturers, product positioning, and hardware technology are all at turning points, and the AR glasses industry may be on the eve of transformation.

Player changes: Industry leaders will transform from venture companies to technology giants, and the industry driving force will undergo a qualitative change; Product positioning changes: Product definitions are gradually converging, and modular or end-side agent-carrying AR glasses may become industry consensus; Technological breakthroughs: SoC/microdisplay/optics are reaching the critical point, and AR glasses that balance experience, cost, and mass production feasibility are promising. CICC believes that Meta's first-generation AR glasses in 2025 can be compared to the iPhone 1 era of the smartphone, initially unifying the product form of AR glasses; Apple's first-generation AR glasses in 2027 may be compared to the iPhone 4, driving the industry into a high-speed development stage.

Investment advice: As AR glasses approach the rapid growth stage of the industry, the development speed and industry space are promising. It is recommended to deeply participate in the AR glasses supply chain and invest in companies with core barriers.

Regarding complete machine assembly, it is recommended to consider Goertek Inc. (002241.SZ), Luxshare Precision Industry (002475.SZ), and Longqi Technology (603341.SH) which are expected to provide support to major customers; In terms of SoC, it is recommended to consider Bestechnic (Shanghai) Co., Ltd., which is expected to excel in low-power AR-exclusive SoCs; In terms of microdisplay optics, it is recommended to consider Will Semiconductor (603501.SH) as the LCoS supplier. As most Micro LED suppliers are unlisted companies, it is recommended to cooperate closely with Goertek Inc., and it is suggested to pay attention to Sunny Optical Technology (02382) and Fujian Forecam Optics (688010.SH); In terms of waveguides, it is recommended to consider Goertek Inc. which has a leading advantage in diffractive waveguide solutions, and it is suggested to pay attention to Sunny Optical Technology, AAC Tech (02018), and Medikay (688079.SH); In terms of acoustics, it is recommended to consider Goertek Inc. and Memsensing Microsystems (Suzhou, China) Co., Ltd., which are expected to benefit from the trend of microphone and speaker upgrades for AR glasses; In terms of PCB, it is recommended to consider Avary Holding (002938.SZ), which benefits from the trend of increased integration of FPC for AR glasses.

In terms of waveguides, it is recommended to consider Goertek Inc., which has a core leading advantage in diffractive waveguide solutions. It is suggested to pay attention to Sunny Optical Technology, AAC Tech (02018), and Mediatek (688079.SH); In terms of acoustics, it is recommended to consider Goertek Inc. and Memsensing Microsystems (Suzhou, China) Co., Ltd., which are expected to benefit from the trend of microphone and speaker upgrades for AR glasses; In terms of PCB, it is recommended to consider Avary Holding (002938.SZ), which benefits from the trend of improved integration of FPC for AR glasses.

The main risks faced by the rating include the impact of economic downturn on terminal demand, slower progress in commercialization of AR glasses, lower consumer acceptance than expected, slower progress in mass production of MicroLED, slower progress in waveguide mass production, and slower progress in supporting ecology than expected.