• In the 1960s, the first AR-helmet – the "Sword of Damocles" – was developed. It was connected to a computer: glasses were attached to the ceiling, and a picture was broadcast through the computer.
• Then, the interactive VR platform VideoPlace was created, and in the 1980s, VPL Research developed more advanced virtual reality equipment – the EyePhone goggles and DataGlove glove.

VR suits, gloves, tracks, better controllers, and other devices allow for a more immersive experience.

The main matrices that produce VR headset displays include LCD, OLED, and AMOLED. In 2024, the industry is set to turn towards new matrices – OLEDoSi, which features high efficiency. Sony Semiconductor leads the OLEDoSi market in revenue, while Samsung Display is acquiring OLEDoSi pioneer eMagin, which has direct emitter patterning technology.

The AI & ML market is divided into 3 segments by type of solution:

Looking at Augmented Reality, the market can be segmented based on technology type into marker-based AR technology segment and markerless technology segment.

• However, AR & VR headset shipments declined 8.3% year-over-year to 8.1 million units in 2023. Sony's PSVR and Meta Quest 3 have been well accepted, but macroeconomic pressure on households coupled with slowing spending in the commercial segment has stalled growth. Nevertheless, 2024 promises to be a year of massive recovery: AR & VR headset shipments are expected to grow by 46.4%. The reason could be the release of Apple's Vision Pro headset, which is already garnering much attention.

• In October 2023, the US Federal Communications Commission (FCC) voted unanimously to open the 6 GHz band for "new ultra-low power devices." This move could lead to new applications for AR and VR.

• Major VR Headset manufacturers focus on making their headsets more affordable and have announced intentions to create lite versions of their new products. Meta, for example, may release a low-cost version of its $199 Quest 3 Lite VR headset in the first half of 2024. According to some sources, Apple is also developing a cheaper version of its Vision Pro headset, with a possible price tag of $1,500-$2,500.

• The display systems research group at Meta recently unveiled the Butterscotch prototype. This prototype limits the field of view to about half that of the Meta Quest 2 and utilizes a 3K LCD with a new type of hybrid lens to achieve an overall system resolution of 55 PPD. This is close to retinal resolution, which is about 60 PPD.

• AR contact lens companies are gaining popularity. Mojo Vision developed the world's smallest and densest dynamic display for the first augmented reality smart contact lenses and is now applying these innovations and expertise to lead a breakthrough in the $160 billion display industry. In October 2023, XPANCEO, a technology startup headquartered in the UAE, announced the completion of an initial round of funding of $40 million that will be used to accelerate the release of contact lenses with AR vision capabilities.

• VR for business applications is gaining traction in several areas, especially when it comes to inspections of capital equipment. For example, since 2017, Walmart has partnered with Strivr to use VR technology to train employees. The relatively low cost of headsets like the Oculus Quest 2 means that virtual reality training can become more cost-effective than flying new employees to training events and conferences.

• The number of AR headsets is expected to grow in 2024 due to the availability of cheaper models from companies such as Xreal and Rokid. AR headset shipments in 2024 are expected to reach 845,000, an 85.6% increase from 2023. According to Gartner, 75% of capital-intensive industries are expected to use AR to reduce costs by 2026. These cost savings can be achieved by streamlining workflows and not having to send employees to training.

• The growth of no-code and low-code platforms may stimulate the adoption of AR. Such platforms will allow companies to integrate augmented reality functionality into mobile apps and websites more efficiently. AR filters are standard technology on many social media platforms, such as Snapchat and Instagram. Given the continued adoption of AR development tools by Apple's ARKit, Google's ARCore, and Amazon's Sumerian, integrating AR functionality into mobile and browser-based e-commerce is easier than ever.

• The virtual reality boom began in 2012, when a little-known startup, Oculus, launched a Kickstarter campaign to raise funds for the Oculus Rift CV1 headset, the first batch of which sold out in 15 minutes in 2015. Since then, the industry has undergone many changes: some companies have reached new technological and marketing milestones in the battle for market share, while others have left the competition, giving way to the winners.
• There are two distinct market segments: consumer and corporate. The latter is characterized by special requirements for resolution and functionality, which becomes a driver for the development of the most potent headsets currently available: for example, thanks to the combination of 4K displays with 51 PPD resolution, advanced LiDAR depth sensor, and autofocus cameras, the Varjo XR-4 headset offers virtual and mixed reality capabilities close to those of natural vision. On the mass market side, Pimax's flagship product, Crystal, with 35 PPD resolution, has some of the best performance in the consumer virtual reality market and is the world's first VR headset to feature glass aspherical lenses.
• However, in the consumer market, the headset's technical characteristics and price-quality relationship are essential. Regarding the price/quality criterion, the leader is Meta, which captured 55.2% of the market and introduced Meta Quest 3 at the end of 2023. The release of the new headset immediately became one of the most significant industry news for 2023. Before the release of Quest 3, Meta's VR and AR technology division, Meta Reality Labs, recorded an operating loss of $3.7 billion with sales of $210 million in the third quarter of 2023. However, the company sees the development of meta-universe and VR headsets as long-term bets on future technology.
• It's worth noting that Mark Zuckerberg's tech conglomerate has not been alone in having difficulties. Global shipments of augmented and virtual reality headsets fell 8.3% year-over-year to 8.1 million units in 2023. Macroeconomic pressure on households coupled with a slowdown in corporate spending slowed down the market growth.
• The good news is that the market is universally expected to rebound strongly in 2024, with headset shipments forecast to grow by 46.4%. There are three reasons for this: first, Meta Quest 3 is just gaining popularity; second, sales of the long-awaited Apple Vision Pro headset started at the beginning of the year, which may become the best headset in the user segment from a technical point of view; and third, the consumer headset market tends to democratize.
• The market development is largely aided by partnerships entered into by major players to create new products. For instance, Qualcomm and Google have announced a partnership for the mobile XR. Before this, from 2017 to 2023, Samsung launched several versions of its Gear VR headset for virtual reality on a smartphone, which did not gain popularity. Google had a similar experience. However, it is possible that a new collaboration between two previously unsuccessful companies will turn out to be a success and could revive the mobile mixed reality market.
• Another trend that cannot be ignored is the shift from fully virtual to mixed reality, with an opportunity to interact with the world around us. There is plenty of evidence for this because all new products, including the already mentioned Meta Quest 3 and Apple Vision Pro, position themselves as mixed-reality headsets.
• However, some went further and offered the corporate segment holographic devices. This refers to Microsoft Hololens 2, created for manufacturing, design and construction, healthcare, and education. For example, with Microsoft Hololens 2, Toyota reduced inspection time by 20%, Lockheed Martin simplified the assembly process, and Mecedes-Benz reduced business trips by 40%, increasing efficiency using remote assistance.
• The use cases for VR/AR/XR headsets are expanding from games and entertainment to educational programs, virtual travel, training, and medical applications. For example, innovations in virtual reality are helping to create new forms of content for movies and television. In real estate, AR technologies allow potential buyers to take virtual tours of properties. In education and training, VR provides tools to create interactive and immersive learning programs, making the learning process more effective and memorable. In medicine, VR trains surgeons to simulate complex surgeries, rehabilitate patients, and treat certain psychological conditions.
• It is important to note that the above discussion focused solely on the headset segment, while peripheral segments attract just as much interest from consumers and venture capitalists. This group includes content creation companies, social platforms, content distribution platforms, cloud services, VR peripherals, development tools, and chip manufacturers. We believe the most promising companies in this field are FitXR, Sensorium, Virtex Stadium, VRChat, and Rec Room.
• Despite the great potential and opportunities offered by the virtual reality market, it is essential to be realistic in assessing its current stage of development, potential risks, and limitations. As with any innovative technology, there are technical and market challenges, such as high initial investments, the need to improve the quality and accessibility of devices, and the development of content that fully unlocks the potential of immersive virtual worlds. In addition, eye fatigue and possible dizziness are still common among users of many VR headsets. Next-generation matrices are a possible solution to this problem, which means that technological progress is one of the critical factors in the development of the industry.
• Another important factor in the market development is the increase in investments. Significant interest in VR/AR/XR from venture capital funds and corporate investors emphasizes the market's potential. Technology industry giants are investing in the market, improving the technology base, and increasing public attention to the field. Investments are made in device development, content, software, and infrastructure.
• Thus, the constraints listed above are stages on the path to maturity and broad market acceptance rather than insurmountable obstacles. We expect that the development of technologies, the emergence of new headsets and peripherals, and the democratization of the market will contribute to the popularization of VR/AR/XR industries, expanding the horizons of their applications and strengthening their position in the market.