Executive Summary
It’s that time of year again. As we enter 2024, our annual exercise kicks in: examining the AR and VR events and lessons of the past year and predicting outcomes for the next year. The following pages will do just that… But first, what’s the high-level view of where we are in the XR lifecycle?
AR and VR – collectively known as spatial computing – continue to hold immense potential. Though they don’t represent the imminent tech revolution trumpeted in their circa-2017 hype cycle, they continue to show gradual progress. After a shakeout followed that hype cycle, AR and VR are now steadily growing at measured and realistic paces.
But the “spatial spectrum” deserves more nuanced analysis as there are varying growth curves across AR and VR subsectors, as well as their convergence in a new batch of passthrough-AR-based mixed reality devices. Spending categories seeing the most traction meanwhile include AR marketing & commerce, as well as consumer VR. Meta continues to advance the latter with massive investments and loss-leader pricing for Quest 2, not to mention the much-upgraded Quest 3 – its new VR flagship and a leading device within the new mixed reality class just noted.
Speaking of Meta, one thing that characterized 2023 was the rapid deterioration of metaverse mania. This fulfilled our prediction in last year’s version of this report that the hype bubble would burst in 2023. The thinking was that the technology is several years, or even decades, from materializing. So without any immediate gratification on the horizon, the herd-mentality-driven tech press and executive-penned Op/Eds will move on to other shiny objects.
That brings us to the big topic that defined 2023 inside and outside of the spatial computing realm: AI. With the rise of underlying AI technology from the likes of OpenAI, generative and conversational AI characterized the technological zeitgeist of the past year. But the big question is how it intersects with XR.
The knee-jerk reaction to AI’s rise is that it replaces the metaverse as a source of funding and attention. And that indeed may be true. However, it’s a mistake to lump AR and VR in with the metaverse’s replacement. Indeed, AI elevates XR in several ways.* For example, XR can be seen as the face of AI, while AI can be seen as the brains of XR. They go together.
This XR/AI convergence isn’t new, as seen in flavors and subsets of XR such as visual search and 3D navigation. However, it took on new forms and areas of applicability in 2023. For example, generative AI is being developed for 3D asset creation, thus automating and streamlining XR developer workflows.
On the user end, AI brings more meaning and personalization. For example, AI plays a key role in a use case that we’re particularly bullish on: captions for the real world. This involves line of sight intelligence that makes consumers empowered and situationally aware. It has become a defining principle and North Star for AR projects underway from Meta to Apple.
But the story doesn’t end there. The XR world is broad and contains several moving parts, many of which evolved in 2023 and are now primed for 2024. For example, what will be the impact of Apple Vision Pro? How are smart glasses evolving? And how is mixed reality becoming a new standard in VR? We’ll tackle such questions throughout this report.
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MethodologyThis report highlights ARtillery Intelligence viewpoints, gathered from its daily in-depth market coverage. To support narratives, data are cited throughout the report. These include ARtillery Intelligence’s original data, as well as that of third parties. Sources are linked or attributed in each case.
For market sizing and forecasting, ARtillery Intelligence follows disciplined best practices, developed and reinforced through its principles’ 18 years in tech-sector research and intelligence. This includes the past 8 years covering AR & VR exclusively, as seen in research reports and daily reporting.
This approach primarily applies a bottom-up forecasting analysis, secondarily vetted against a top-down analysis. Together, confidence is achieved through triangulating figures in a disciplined way. More about our methodology can be seen here, and market-sizing credentials can be seen here.
Disclosure & Ethics StatementUnless specified in its stock ownership disclosures, ARtillery Intelligence has no financial stake in the companies mentioned in its reports. The production of this report likewise wasn’t commissioned. With all market sizing, ARtillery Intelligence remains independent of players and practitioners in the sectors it covers, thus mitigating bias in industry revenue calculations and projections. ARtillery Intelligence’s disclosures, stock ownership, and ethics policy can be seen in full here.
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