What you need to know
AR and VR technologies are being lauded as the fourth wave of personal computing, but will scarce content and even scarcer components limit growth?
Not long ago, most high-end televisions included the latest feature in personal entertainment: 3D capability. Spurred by the success of 3D movies such as Avatar, the technology purported to offer the home viewer a cinematic experience, and all of the major TV manufacturers jumped on board. Yet this year, the last holdout in 3D television, Samsung, ceased offering the feature, and the technology is considered effectively dead.
3D TV died for a number of reasons, including a shortage of good content and the need for viewers to wear uncomfortable eyewear. High price tags didn’t help either. Ultimately, though, “people didn’t really need 3D TV,” observes an analyst for IDC, the technology intelligence provider, in Taiwan.
3D TV is only one of several technologies – including netbooks, QR codes, 3D printing, and wearable technology– that launched to great acclaim but then either failed to live up to expectations or flopped completely.
Will the nascent virtual and augmented reality sectors face a similar fate?
Virtual Reality (VR) is technology that generates a simulation of a three-dimensional image or environment. Equipment includes a fully enclosed headset with a screen inside, and often gloves fitted with sensors or similar controllers that allow participants to engage in a simulated world. The technology has been under development for years, and headsets have been developed – from the ultra-cheap Google Cardboard to higher-end headsets offered by Samsung – that transform a smartphone into a mobile VR machine. This year saw the commercial launch of VR for PCs and gaming consoles, including such offerings as HTC Vive, Oculus Rift, and Sony PlayStation VR. Standalone VR headsets that include the screen but are not tethered to a PC are also being developed, including the Oculus standalone that is codenamed “Santa Cruz.”
Augmented Reality (AR), by contrast, merges computer-generated imagery with the user’s view of the real world, providing a composite view. Examples of AR hardware include Google Glass, the eyewear created by Google that superimposed computer-generated data and imagery on the glass lenses, as well as the Microsoft HoloLens. The Pokémon Go game is an app that takes advantage of a smartphone’s capabilities in location and photography to combine animated figures with real-world images.
Expectations for these technologies are huge. IDC, which considers the two segments together as “virtualized reality,” puts the compound annual growth rate at 186% between 2015 and 2020 – with VR shipments skyrocketing from 400,000 units in 2015 to 64.8 million in 2020, and AR shipments surging from 200,000 units to 45.6 million in the same period. “Currently AR/VR has a US$5.2 billion market for 2016,” says the IDC analyst. “We expect that by 2020 the AR/VR market will grow to US$162 billion.”
Technology analytics firm Digi-Capital sees similar growth, forecasting a US$90 billion global market for AR and US$30 billion for VR by 2020. Digi-Capital likens AR/VR to the next big wave of personal computing, following the PC, internet, and mobile.
The applications for AR/VR are equally astounding. While gaming is the obvious application, experts see a host of potential industrial and commercial applications. Paramedics, for example, will one day be able to view a patient’s vital signs in their AR eyewear as they provide care, or see warnings about the use of particular drugs or be able to provide briefing notes for doctors waiting for the patient in the hospital.
Customs officers could use AR eyewear to see inside a container to check its contents against the QR code, and warehouse workers could check the contents on the shelves just by looking through their AR lenses.
The more immersive VR could provide accurate simulations to better prepare firefighters or soldiers the challenges ahead, and could even help people suffering from phobias or Post-Traumatic Stress Disorder (PTSD) to confront their fears and work towards overcoming them. Immersion into VR could help enrich the lives of the disabled and bedridden. Architects and designers could see their blueprints become 3D models, while “travel” to distant places could become as easy as hooking up VR apparatus in one’s living room. Marketers anticipate sending ads directly to consumers as they pass by their storefronts, enabling them to virtually see how clothes would fit or appliances look in a room.
The opportunities for Taiwan’s technology supply-chain vendors are equally promising. AR/VR requires powerful CPUs (Central Processing Units) and especially GPUs (Graphics Processing Units), most of which are designed by AMD of the U.K. and NVidia of the United States but are manufactured by Taiwan Semiconductor Manufacturing Co. (TSMC). GPUs are the core of graphics cards that are assembled by Taiwanese firms, including MSI, Gigabyte, ASUSTek, and Acer, for resale mostly to hardcore video gamers.
The demands of AR/VR technologies will also stimulate the refresh rate – the rate at which consumers purchase new computers and hardware – particularly in the gaming sector. The improving power and performance of PCs has lengthened the refresh rate to some four years lately, according to IDC, but analysts see the timeframe shortening to three or even two years as VR picks up. The beneficiaries will be local computer makers, including Acer and ASUSTeK, along with computer OEM firms such as Hon Hai, which assembles computers for Dell and HP and smartphones for Apple.
To fulfill these rosy forecasts, though, the AR/VR segments will need to overcome a number of obstacles in the following areas:
Mobile VR is already well underway, with numerous firms in China’s tech hub Shenzhen making screenless headsets that employ a smartphone for screen and content. According to an IDC analyst, the market for mobile VR in China is far more mature than elsewhere, with dozens of manufacturers and many more component suppliers comprising their own ecosystem. On the other hand, “quality is a mixed bag,” the analyst says, based on IDC’s reviews of imported Chinese-made mobile VR headsets, some of which are available on the Taiwan market. “Some are quite good and some are only mediocre,” he notes.
Trendforce analyst Jason Tsai (蔡卓卲), who covers the AR/VR markets, is less charitable in his assessment. Most of the manufacturers “do not pay attention to quality and most [of the products] are low quality, uncomfortable, and will make you sick,” he says.
Mobile VR is challenged by limits to smartphone capabilities. While daily use of a smartphone only draws on a certain amount of the phone’s memory, “VR scales those demands up,” explains the IDC analyst. “The phone heats up and burns power because with VR your phone’s processor is at max power. Some phones only last about five minutes. We talked to vendors in the mobile processor space and they say that’s a huge problem for them.” Adding in 3G or 4G online capability will consume even more battery power.
Another major technical challenge for VR is something called “photon demotion” – the time lag between moving your head and the screen adjusting accordingly. More than a few milliseconds’ lag will cause viewers to lose immersion and feel unwell, but many phones lack the computing power to handle the demands of VR.
The industry is responding with advances such as the ARM applications processor Coretex A73, announced at Computex last June and designed specifically for the demands of AR/VR technology, offering greater efficiency that enables sustained performance without overheating. Taiwan fabless semiconductor company MediaTek is ARM’s partner on this project.
Also, Google is set to launch its new Daydream headset this month, and many industry insiders believe it will be a game changer for mobile VR. Trendforce’s Tsai, for one, forecasts that Google will drive the industry towards high-end “daydream-ready” smartphones, and that many of the Chinese smartphone makers won’t be able to compete.
PC and console VR
VR systems employing the power of PCs and gaming consoles just became available this year when the Oculus Rift launched in major markets in March, followed swiftly by the HTC Vive in April, and then the Sony PlayStation (PS) VR on October 13. These VR systems are far more powerful than mobile VR. The Vive from Taiwan’s HTC is considered the gold standard in PC VR, which is reflected in the price. At US$799 (not including cost of PC), it is more expensive than the Oculus Rift, which retails for US$599 (likewise not including PC) and the PS VR, which retails for only US$399 for those with a PS4 gaming console.
The HTC Vive was created in partnership with U.S. gaming company Valve, and runs on Valve’s Steam VR operating system. The Vive differs from its competitors in offering room-scale virtual reality, in which the VR experience occurs within a predefined physical space, allowing users to walk around and explore.
Analysts forecast that creating content that fully exploits the potential of VR will be as vital as the technology to realizing success.
“Using a mouse to play a game and using a touch panel to play a game – these are different experiences and you need to design the game specifically for these different experiences,” says Trendforce’s Tsai. “VR is the same; you need to design for the VR experience. Will you play Candy Crush in virtual reality? I don’t think so.”
Gaming is considered the obvious market for VR, and HTC’s partnership with Valve provides the beleaguered smartphone vendor with a wealth of resources and experience in gaming development. HTC faces stiff competition in the content department from Sony, however, which has the close support of the vast Japanese gaming industry as well as its own Hollywood studio, Columbia Pictures.
Developing PC games takes substantial amounts of time, effort, and money, and gaming companies are already running into difficulties. According to Tsai, recent disappointments in wearables and 3D TV have made investors shy about putting up the money in what is still an unproven market.
Tsai says it’s a “chicken and egg” question: “If you want to get the consumer you have to provide a lot of content, but if there aren’t enough consumers, why would the content provider spend so much resources creating content for your device?” He notes that at the beginning of the year, the number of consumers for PC and console VR was effectively zero.
While content will be king in the long run, at the moment demand has been so strong that the biggest challenge is finding sufficient components. OLED displays, for example, have recently surged in demand. Lighter and thinner than LCD screens, they consume less power and can be made flexible. The image quality is considered superior as well, and they have faster response times, which is critical in VR.
Recent technological advances have brought down the costs of production, and demand from smartphone makers – and now VR firms – has increased rapidly. Further, according to marketing analytics firm IHS, 99% of OLED displays are produced by one manufacturer – Samsung. Tsai forecasts that other display manufacturers are likely to be entering the market, but in the short term, tight supplies are resulting in shipping delays and suppressing sales.
Meanwhile, standalone VR gear that would require neither a smartphone nor computer remains largely in development.
AR is simultaneously more and less mature than VR. While PC VR has just entered the market, AR hardware and apps have already hit the market – some to considerable acclaim, but others that have failed to arouse much interest.
Google Glass is an example. Despite the hype surrounding its launch in April 2013 as a breakthrough product, it was yanked from the market by January 2015 after failing to resonate with consumers.
The game Pokémon Go likewise got off to a massive start before fading in popularity. Initially released in the United States and select countries on July 6, it soon attracted over 25 million daily users and was downloaded 500 million times. But by late September, daily downloads plummeted from 27 million to 700,000. Some people now refer to it as Pokémon Gone.
The failure of Google Glass highlights the fact that the challenges involved in creating AR hardware are less easily solved than with VR hardware. Various companies are continuing to offer AR-enabled eyewear, mostly aimed at industrial and commercial applications. But until a better solution is found, smartphones are providing the best opportunities for widespread experimentation in AR by software developers. “The smartphone is the second best choice, but it’s a start,” says Trendforce’s Tsai.
By allowing users to remain rooted in the physical world while engaging with technology, AR should have greater potential for widespread use than VR. Tim Cook, CEO of Apple, was quoted on Good Morning America in September as saying: “My own view is that augmented reality is the larger of the two, probably by far, because this gives the capability for both of us to sit and be very present talking to each other, but also have other things visually for both of us to see.”
Ultimately, though, for both AR and VR to avoid the fate of 3D TV they will need to successfully answer the question: do people really need them?
(Taiwan Business TOPICS is published monthly by the American Chamber of Commerce in Taipei.)
Editor: Edward White