The Coronavirus outbreak is expected to cause manufacturing delays at the source and reduce the overall demand for augmented reality (AR) smart glasses, according to global tech market advisory firm ABI Research
At the same time, there will be a significant increase in demand on the enterprise and consumer side as telepresence and content demand grows. The balance between these two will see 16mn AR and virtual reality (VR) head mounted display (HMD) shipments in 2021, maintaining the trajectory of the 3.5mn consumer AR shipments in 2024.
“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,” said Eleftheria Kouri, research analyst at ABI Research.
COVID-19 has affected CE companies, especially in China, Taiwan and South Korea
“As anticipated, COVID-19 has impacted the AR and 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,” Kouri explained. Finally, delays are anticipated in AR/VR application development and upcoming upgrades due to the cancellation of developer conferences (Apple, Google, Facebook).
Delays may encourage potential customers to purchase products from competitors
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.
“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 pointed out.
AR consumer market and smart glasses manufacturers are at a relatively lower risk
“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)).
In addition, 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,” recommended Kouri.
