AR and VR shipments slow due to COVID-19 pandemic

The COVID-19 pandemic will have a significant impact on the augmented reality (AR) and virtual reality (AR) manufacturing and shipments in 2021, according to new findings from ABI Research.

The global tech market advisory firm looked at the short and long term impact of the virus on this industry.

Key findings are that it will cause manufacturing delays, reduce the overall demand and at the same time increase enterprise and consumer demand while more businesses and individuals look to invest in telepresence and content.

ABI Research research analyst Eleftheria Kouri says, "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.

As a result of this trend, it is forecasted that in 2021 16 million AR and VR head mounted display (HMD) units will be shipped, which will maintain the initial forecast of 3.4 million consumer AR shipments by 2024.

According to Kouri, COVID-19 has had an impact on the majority of CE companies especially in China, Taiwan and South Korea.

Kouri says, "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.

For instance, MAD Gaze, a Hong Kong AR smart glasses provider targeting consumers, 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.

Furthermore, Nreal, a China-based AR consumer smart glasses provider, announced production and shipment delays due to the pandemic.

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, ABI Research finds.

In addition, delays in AR/VR application development and upgrades are expected due to the cancellation of developer conferences from major vendors such as Apple, Google and Facebook.

The longer term impact of these delays and challenges are a potential loss in revenue and profit, loss of customers and difficulty in maintaining a positive reputation.

On the financial front, Kouri says, "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. Also, delays and reduced funding series are expected, mainly affecting startups.

When it comes to customers and user experience, ABI states that long-term production and shipment delays will mainly affect smaller companies, especially those launching devices for the first time in the market, such as 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, ABI Research states.

Moreover, continuous delays of product delivery will negatively affect user experience, even if the delays are caused by unexpected reasons, the research finds.

Kouri says, "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.

However, the AR consumer market and smart glasses manufacturers face lower risk in terms of customers, due to the fact that AR consumer devices are not a high demand product and competition is not yet high.

Kouri says AR and VR devices can provide solutions to different industries and groups during this time of the COVID-19 pandemic, and as such there may be an opportunity for vendors to become firmly established in the market.

She says, "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).

"Also, 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.