According to a research report released by Soochow, as of May 2024, global sales of Ray-Ban Meta smart glasses have exceeded 1 million units, and it is expected that the annual shipment volume in 2024 will exceed 1.5 million pairs. With the rapid development of multimodal AI, AR glasses empowered by AI can not only greatly enhance their interaction capabilities, making them more intelligent and user-friendly, but also expand the application scenarios of AR glasses. From the perspective of the layout of industrial giants, Meta, which has the highest market share in the XR field, is also actively deploying in the AI+AR field. The success of Ray-Ban Meta proves the feasibility of smart glasses products becoming AI terminal landing scenes. In the future, with the acceleration of industrial giants' layout and the improvement of supply chain cost-effectiveness, AI+AR glasses are expected to develop rapidly.

The main viewpoints of Soochow Securities are as follows:

Ray-Ban Meta sales exceeded one million, smart glasses are becoming an important form of AI hardware landing.

'AI glasses' can be defined as incorporating multimodal AI functions on the basis of ordinary glasses/sunglasses, which is an important exploration of end-side AI application scenarios. Glasses combined with multimodal AI is one of the best forms of personal AI agents, and smart glasses are becoming an important form of AI hardware landing, especially expected to become an important carrier of universal multimodal AI assistants.

In September 2023, Meta and Ray-Ban released the second joint product, Ray-Ban Meta, which has a comfortable and stylish design, similar weight and appearance to traditional glasses, and is equipped with Qualcomm AR1 chip and a 12 million pixel camera, a newly designed speaker, a five-microphone array, and also integrated with Meta's Llama model, which can achieve real-time translation and answer user questions. Users only need to say 'Hey Meta' to activate the built-in AI assistant for interaction. According to The Verge's statistics, as of May 2024, global sales of Ray-Ban Meta smart glasses have exceeded 1 million units, and it is expected that the annual shipment volume in 2024 will exceed 1.5 million pairs.

AI+AR glasses may be the next development trend of the industry, and industry giants are actively laying out.

According to IDC data, the global AR/VR device shipments in 2023 decreased by 8.3% to 8.1 million units year-on-year. Specifically, the VR device shipments in 2023 decreased by 10.7% to 7.6 million units year-on-year, while AR device shipments increased by 63.5% to 0.5 million units year-on-year. It is estimated that the total shipments of AR headsets in 2024 will reach 0.845 million units, an increase of 85.6% year-on-year, with a growth rate far exceeding other XR products.

With the rapid development of multimodal AI, AR glasses empowered by AI not only greatly enhance interaction capabilities, making them more intelligent and user-friendly, but also expand the application scenarios of AR glasses. Looking at the layout of industry giants, Meta, the leader in the XR field, is also actively expanding in the AI+AR field. According to IT House, Meta plans to showcase its first smart AR glasses "Orion" in September 2024, which is expected to adopt a geometric waveguide + LCoS full-color micro display solution.

AR display devices and optical solutions are the core elements for cost reduction and efficiency improvement. The development of MicroLED and waveguide shows great prospects.

The main components of AR devices include chips, perception and interaction, sensors, optical modules, and frames. Among them, the optical module composed of display devices and optical solutions is the highest value-added component, accounting for approximately 50% of the cost of AR devices. It is also the component that directly impacts the user experience, and is the core element for cost reduction and efficiency improvement in the industry chain.

Currently, the AR glasses market is mainly dominated by movie glasses using the Bird bath + Mircro OLED solution. However, the Bird bath optical solution has issues such as low external transmittance, large module size, and high light loss. MicroOLED has low brightness and limited material lifespan. Waveguide solutions have advantages in volume, clarity, FOV, etc. MicroLED has better luminous brightness, response speed, and lifespan compared to MicroOLED. Therefore, the MicroLED + waveguide solution may be the optimal optical display solution for AR glasses and may become the main development direction in the future after the production process and technology mature.

Investment recommendation: The success of Ray-Ban Meta has demonstrated the feasibility of smart glasses products becoming AI terminal application scenarios. In the future, with the accelerated layout of industry giants and the advancement of cost reduction and efficiency improvement in the supply chain, AI+AR glasses are expected to develop rapidly. It is recommended to pay attention to ODM and acoustic components represented by Goertek Inc. (002241.SZ); ODM components represented by Longqi Technology (603341.SH), Huqin Technology (603296.SH), and Yidao Information (001314.SZ); optical components recommended to pay attention to Zhejiang Crystal-optech (002273.SZ) and Zhejiang Lante Optics (688127.SH); SoC and storage components recommended to pay attention to Bestechnic (Shanghai) Co., Ltd. (688608.SH) and Bawang Storage (688525.SH); terminal brand components recommended to pay attention to Skyworth Digital (000810.SZ) and Doctorglasses Chain (300622.SZ), and so on.

Risk reminder: The expansion of application scenarios for glasses products may not meet expectations; downstream demand may not meet expectations; technology research and development may not meet expectations.