According to TrendForce research, the global Metaverse market reached US$38.6 billion in 2021, an increase of 17.9% compared to 2020. The global Metaverse market is expected to reach US$47.5 billion in 2022, with a growth rate of 18.7% and a CAGR (Compound Annual Growth Rate) from 2022 to 2030 of 39.4%. With the rapid expansion of the digital economy to the Metaverse and its total addressable market (TAM), total revenue of the global digital economy will account for 22.3% of total global GDP in 2028. Initial estimates reveal that the potential market opportunity of the Metaverse is approximately US$3.8 to US$12.5 trillion.
Due to the vague concept and definition of the Metaverse, specific actions and orientations are mainly based on games and NFTs (Non-Fungible Token, non-fungible tokens). Potential areas of development and feasible markets are also relatively vague, forcing companies into a mostly wait and see stance. In the second half of 2021, countries successively introduced relevant policies for the Metaverse, solidifying a clear development vision, and attracting the participation and speedy investment of Acer, HTC, Microsoft, Tencent, Take-Two, and Lenovo. At present, Adidas, Atari, Ferrari, Gap, Hulu, Nike, Verizon, and Walmart are entering the virtual world in different ways to witness the immersive experience of the digital universe.
Since the Metaverse’s digital asset transaction and exchange program involves three inseparable structures of legal currency, cryptocurrency, and NFTs, it also reeks of issues on many levels including ownership and intellectual property rights, digital asset transfer pricing, system encryption, supervision mechanisms, money laundering prevention, and combating terrorism, resulting in different degrees of openness to the Metaverse in different countries. Take the United States and China as examples.
The U.S. Treasury Department released the “Study of the Facilitation of Money Laundering and Terror Finance Through the Trade in Works of Art” in February 2022. The report pointed out that, due to limited evidence of money laundering, the government temporarily refrained from taking immediate intervention measures against the self-regulating global art industry (including digital assets). However, if the current situation persists, there will be lurking future risks to the US economy and national security, such as an increase in the risk of entities using the soaring value of the digital art market to bypassing global legal norms. Whether or not to intervene will need to be discussed further.
In contrast, China has adopted stricter policies, such as prohibiting the circulation of cryptocurrencies in the market and prohibiting cryptocurrency exchange. From this point of view, if China wants to develop the Metaverse, it will be limited in terms of expanding into new application fields. On the whole, the world has the same development vision in AR/VR, advanced infrastructure (including communication technology), and AI/ML. However, China’s restrictions on “cryptocurrency” and “game bans,” will pose both the greatest challenges and new market opportunities to participants in games and digital assets. Metaverse development plans proposed from various regions in China and the aforementioned legal digital currency show that the Chinese authorities already have a set of plans, development goals, and operation frameworks.
(TechNews) Google confirmed on May 4th that it has acquired Raxium, a start-up company with Micro LED display technology, which is expected to become key in Google’s mission to create a new generation of AR displays.
Google senior vice president of devices and services, Rick Osterloh, who leads the development of Google’s hardware products, stated that Raxium has spent five years creating a small, cost-effective, and energy-efficient high-resolution display that lays the foundation for future display technologies, adding, this company’s technology in this field could play a key role in Google’s hardware investments. Raxium, headquartered in Fremont, California, will be merged into Google’s devices and services group in the future but he did not disclose the purchase price or other details.
According to Raxium’s official website, the pixel pitch of s Super AMOLED screen on a mobile phone is approximately 50 microns but the company’s Micro LED technology can achieve approximately 3.5 microns and it claims to be able to create unprecedented display efficiency.
When foreign media, The Information, reported last month and first exposed Google’s plan to acquire Raxium, it pointed out that Micro LED technology can create AR displays that are more energy-efficient than other solutions while retaining vivid colors. In addition, Raxium is working on the monolithic integration of Micro LEDs, which is expected to significantly reduce costs.
This move makes Google’s plans for subsequent AR hardware products increasingly clear. Google acquired glasses startup North in 2020 and is reportedly recruiting engineers to develop an operating system for AR displays. It was revealed by foreign media in January this year that Google’s laboratory is developing a head-mounted AR device code-named “Project Iris” which is under the same management as “Project Starline” shown at the Google I/O 2021 developer conference last year.
AR/VR device shipments revised up to 14.19 million units in 2022, with an annual growth rate of 43.9%, according to TrendForce research. Growth momentum will come from increased demand for remote interactivity stemming from the pandemic, as well as Oculus Quest 2’s price reduction strategy. Microsoft HoloLens 2 and Oculus Quest 2 are first in market share for AR and VR, respectively.
According to TrendForce, the topic of the Metaverse has driven brands to actively plan for and stimulate product shipment performance. However, the AR/VR device market has yet to experienced explosive growth due to two factors: component shortages and the difficulty of developing new technologies. In addition, cosmetic and size considerations have made the more optically and technically difficult Pancake design the first choice for new high-end products. Furthermore, various embedded tracking feedback technologies key to enhancing the user’s immersive experience such as eye tracking and 6DoF further affect the development progress of a new product as a whole. Since there are no new foreboding products on the horizon, TrendForce believes, no other branded products have a chance at supplanting the current mainstream status of Oculus or Microsoft until at least 2023.
The Oculus Quest 2, which costs between US$200 and US$400, is currently the most popular AR/VR device in the consumer market. TrendForce expects Oculus to launch an advanced version of the Quest product within two years, reaching a hardware performance equivalent of US$700 or down to a retail price of US$500 with discounts. This product is expected to expand the size of the high-end consumer AR/VR market. The commercial market is dominated by the HoloLens 2 which costs more than US$1,000 and upwards of US$3,500. Since the commercial market places more emphasis on the benefits of hardware and software integration, manufacturers that dominate commercial systems, software, and platforms have the advantage. Thus, Apple has become another focus in the AR/VR device market.
Strong shipments of Oculus and Microsoft products will likely force Apple to release relevant products to join the competition this year. However, TrendForce states, considering hardware performance requirements and gross profit margins, Apple will likely target the commercial market and adopt the same pricing strategy as HoloLens, hardware priced in the thousands of dollars and a monthly subscription-based software solution. Overall, TrendForce believes that the launch of new products this year by Apple, Meta, and Sony may be delayed and will not add significant growth to the overall AR/VR market for the time being.
Factors such as the rising popularity of topics related to the metaverse and UGC (user-generated content), as well as the rapid increase in AR/VR device shipment, will likely result in the creation of a growing body of virtual reality content in the market, according to TrendForce’s latest investigations. TrendForce expects annual global virtual reality content revenue to grow at a 40% CAGR from US$2.16 billion in 2021 to US$8.31 billion in 2025.
TrendForce further indicates that gaming/entertainment, videos, and social interactions comprise the primary categories of virtual reality content. Incidentally, as the construction of the virtual world and the development of virtual reality content are unlikely to be accomplished by only a handful of companies alone, companies in this space will therefore place an increasing emphasis on UGC instead. Leading companies will likely leverage the build-out of virtual reality platforms/environments and the provisioning of developmental tools/interfaces in order to not only lower the barrier to entry for content creation, but also raise user participation, thereby driving up the content market for virtual reality applications.
In consideration of profitability, most companies still adopt a wait-and-see approach towards the virtual reality market because content development for the virtual world entails substantial time and expenses. The vast majority of UGC, however, is not profit-driven. Hence, TrendForce believes that UGC is likely a more suitable point of entry into the virtual reality market for most companies that wish to do so. Furthermore, companies that specialize in metaverse applications will place increasing emphasis on developing platforms, building comprehensive ecosystems, and lowering the barrier to entry for content creation through the appropriate development tools and interfaces.
On the whole, factors that affect the development of the global virtual reality content market include not only the availability of platforms and their respective contents, but also the build-out of hardware equipment and infrastructures, such as high-speed computing chip adoption as well as 5G and Wi-Fi 6 deployment. On the other hand, as the virtual world places a high demand on instant, lifelike, and stable interactions, the ability to resolve signal disruptions has in turn become a topic that demands attention. With regards to end devices, the penetration rate of AR/VR devices going forward will primarily be determined by suppliers’ pricing strategies. In light of the growth of virtual reality application content, companies will look to expand their user base via low-priced hardware devices and compensate for their reduced hardware profitability through software sales. Finally, in response to the demand for more immersive and interactive user experiences, the integration of more sensors and better feedback design is set to become the next major trend of AR/VR device development.
Microsoft announced in early November that it will release the preview of Mesh for Microsoft Teams (henceforth referred to as simply “Mesh”) in 1H22 as a chat and collaborative platform for the metaverse. By providing a virtual meeting space, in which Teams users can conduct meetings, chat, work collaboratively, and share documents, Mesh is set to become an entrance to the metaverse.
Community interactions will serve as a starting point for metaverse development
Microsoft first unveiled Microsoft Mesh during its Ignite 2021 event in March. This platform supports applications including HoloLens Mesh and Altspace VR, with more Microsoft Teams services to be released in the future. By announcing ahead of time that the preview version of Mesh will be released in 2022, Microsoft is hoping to leverage the recent emergence of topics related to the metaverse in order to increase its customers’ engagement with the new functionalities of Mesh. Hence, the company is positioning Mesh as an entrance into the metaverse by first attracting users through functions such as teleconferencing, collaboration, and chat. Microsoft will then gradually add to the number of applications and services in the virtual reality, thereby eventually constructing a complete virtual world.
Judging from the current progress of development, TrendForce believes that social communities, teleconferencing, and virtual meetings will become AR/VR applications most attractive to consumers. That is also why companies currently developing AR/VR solutions regard these applications as the starting point of metaverse development. These applications’ trending importance can primarily be attributed to the two reasons of demand and supply. Regarding the demand side, not only has the emergence of the COVID-19 pandemic brought about significant growths in teleconferencing and remote interaction usages, but there has also been a gradual change in how people interact in internet-based communities. More specifically, this change refers to a shift in interactions from texts, images, and videos to virtual avatars. As a result, the consumer market is expected to have a relatively high acceptance for AR/VR-driven community interactions and teleconferences. Regarding the supply side, on the other hand, service providers that operate social media and teleconference platforms drastically differ from the typical hardware brands in terms of product strategy, since these providers generally aim to first create a massive user base rather than deriving profits from a single product. As such, these providers are comparatively more willing to invest massive resources into expanding their presence in the market during the initial phase even though doing so may potentially incur financial losses.
R&D and release of device hardware will become the most significant challenge for platform service providers
For Microsoft, Mesh represents a starting point, not only towards the development of the metaverse, but also one that requires investment in more areas, since the metaverse requires the realization of a virtual world that is more immersive and lifelike. Apart from Microsoft’s existing competencies in cloud services and OS software, the company still needs to achieve a sense of realism in the virtual avatars and interactions that it creates, and these creations need to reflect changes made by the user. For instance, the mouth and facial expressions of virtual avatars need to be able to instantly adapt as their users speak, and this process involves not only software adjustments, but also the integration of sensors and other hardware devices. As long as hardware brands require that their individual products remain profitable, Microsoft will find it difficult to hand over the responsibility of hardware-related technological R&D and product releases to the hardware brands. Unless Microsoft is willing to provide sufficiently high subsidies and absorb all financial losses, it will inevitably release its self-designed consumer AR/VR devices – for the same reason that Meta (also known as Facebook) acquired Oculus, and ByteDance acquired Pico. On the other hand, crossing over to the hardware market represents entering an industry that is yet to mature and that requires investment into multiple technologies. Platform service providers will therefore need to invest more resources into hardware development, and this remains one of the challenges Microsoft faces after entering the metaverse.