Extended Reality & VR: From Niche to Mainstream in 2024?

After enduring three consecutive years of decline, the Extended Reality (XR) market is poised for a significant comeback in 2024, according to forecasts by industry analysts. Counterpoint projects an impressive 54% year-over-year growth, signaling a positive turn for the industry. This resurgence is expected to be driven by various factors, including the release of new products, advancements in technology, and expanding applications of XR.

One of the key drivers of growth in the XR market is the anticipated surge in headset shipments. Analysts anticipate a record-breaking surge of 3.9 million XR headset shipments in 2024, representing a significant double-digit increase from the previous year. This surge is primarily attributed to the highly anticipated release of Apple's Vision Pro headset, which is expected to contribute 600,000 units to the market in 2024, according to TrendForce. Established players such as Meta and Sony are also expected to drive growth with their respective Quest 3 and PlayStation VR2 advancements.

Central to the success of XR devices is their hardware components, which play a crucial role in delivering immersive experiences. With augmented reality experiences becoming increasingly intricate, there is a growing demand for processors boasting superior processing power and graphical capabilities. Leading companies like Qualcomm, Nvidia, and Apple are at the forefront of innovation in this field, recently unveiling groundbreaking advancements such as the Snapdragon XR2+ Gen 1, designed to cater to the specific needs of AR and virtual reality (VR) applications.

For mobile AR devices, striking a balance between power and battery life is essential. Chipmakers are investing in cutting-edge low-power technologies like Arm's Cortex-A78 architecture and custom AI accelerators to optimize performance for AR tasks, ensuring users can enjoy prolonged usage without compromising on experience quality.

In addition to hardware components, advancements in display technology are also driving innovation in the XR market. Continued development in pancake optics holds promise for reducing the bulky form factor of AR glasses, making them more appealing to consumers. Recent strides in miniaturization and enhanced light efficiency are driving the feasibility of integrating these optics into consumer devices.

Various sensors play a crucial role in tracking movement and environmental cues, enhancing the overall AR experience. Advancements in eye-tracking and gesture-recognition technology have revolutionized interaction with AR content, offering users a more natural and intuitive interface.

In addition to hardware advancements, the global AI server market presents another bright spot, with TrendForce predicting a 40% growth rate in 2024, resulting in over 1.6 million units shipped. This growth is propelled by the increasing adoption of AI PCs for edge AI applications, requiring more powerful and efficient servers.

Geographically, North America is forecasted to maintain its dominance in 2024, further strengthened by the exclusive availability of Apple's Vision Pro headset in the region for the majority of the year. This exclusivity is expected to attract early adopters and solidify North America's leadership position in the XR market.

While the overall size of the XR market remains relatively modest, the projected growth represents a significant turning point. The influx of new players, innovative products, and expanding applications bodes well for the future of XR technology. Semiconductor companies involved in developing and manufacturing key components for XR headsets are well-positioned to capitalize on this anticipated market expansion.