As we roll into 2023, it’s time for our annual ritual of synthesizing the lessons from the past twelve months and formulating the outlook for the next twelve. 2022 was an incremental year for AR & VR, which both continue to gradually push forward in gaining mainstream traction.
Highlights include mobile AR engagement & monetization, continued R&D in AR glasses, and the gradual march of VR. Amidst all this, the last year was also defined by the continued rise of metaverse mania. The hype machine is still in high gear, generating lots of vapor.
So where is spatial computing, and where is it headed? Our research arm ARtillery Intelligence’s recent report Spatial Computing: 2022 Lessons, 2023 Outlook tackles these questions. After recently publishing 2023 predictions here on AR Insider, we shift gears to 2022 lessons.
To that end, what were the biggest takeaways in 2022 in the wide world of spatial computing? There were many, but we’ll zero in today on the state of headworn AR. Though it’s not fully baked today, it’s the form factor that represents AR’s eventual endgame and fully-actualized self.
After examining the state of mobile AR last week, we move on to AR’s endgame: headworn. Though AR glasses haven’t fully arrived, they represent the AR modality that will unlock the technology’s true potential. In fairness, AR glasses have arrived in earnest in the enterprise.
That’s because enterprises have fewer hurdles for AR glasses. For example, AR glasses’ style crimes aren’t the same issue in workplace contexts. However, this won’t always be the case. Consumer/ enterprise spending shares could flip as AR glasses gain wearability.
That flip is a key consideration when projecting AR market sizes because consumer markets are inherently larger than enterprise markets due to population sizes. But enterprise spending often leads in early days of emerging tech. And that’s what we’re seeing now in AR.
To quantify that, ARtillery Intelligence projects AR glasses spending to grow from $1.8 billion in 2021 to $35.1 billion in 2026. Enterprise spending is 95 percent of that today but will retract to 62 percent by 2026 and continue to decline until consumer/enterprise trendlines intersect.
But that could take several years, not just due to requisite technical evolution, but cultural acceptance. As seen in the Google Glass era, consumer acceptance and comfort for face-worn hardware (with a camera, no less) is a critical gating factor, and will take a while to overcome.
So the question that remains is what it’s going to take to accelerate consumer AR acceptance. And that’s where headworn AR’s biggest looming topic factors in: Apple. If there’s one company that has the potential to jumpstart the market, per its classic “halo effect,” it’s Apple.
Beyond the “if?” is the question of “what?” Several signs point to a potential VR-like entertainment device with passthrough AR in 2023, followed in later years by AR glasses. Apple’s motivation for both devices is to revive its core hardware business as the smartphone market matures.
Smart glasses could accomplish this by both boosting and succeeding the aging iPhone. The former happens as it creates reliance on the iPhone for split processing and connectivity. Indeed, the phone gains importance — and user incentive to upgrade — if it powers your smart glasses.
An iPhone succession plan meanwhile happens through a suite of integrated wearables that augments the iThings at the center of our computing lives. We’re talking line-of-sight graphics through AR glasses, spatial audio from your AirPods, and biometrics from your Apple Watch.
This theory fits Apple’s signature multi-device ecosystem approach. In this way, AR glasses will be a key puzzle piece in Apple’s high-stakes wearables road map. Meanwhile, the good news for everyone else is that the outcome of these self-motivated moves could lift all boats in AR.
Beyond speculative AR’s outcomes, what about today’s market? One of the most notable events of the past year in the world of headworn AR was the return of Magic Leap… this time with an enterprise focus. It coupled this pivot with a second swing at AR glasses: Magic Leap 2 (ML2).
ML2 represents a sizable and widely recognized leap from ML1. This also comes as headwinds challenge its chief competitor: Microsoft. The last year has seen some erosion to Microsoft’s enterprise AR dominance due to a combination of internal and external factors.
Those factors include turbulence in Microsoft’s U.S. Army contract, internal disagreement about HoloLens 2’s strategic importance, and the high-profile departure of HoloLens creator Alex Kipman. Microsoft also recently endured a large round of layoffs that impacted XR divisions.
Without disparaging Microsoft, we note this sequence of events only to say that the timing is opportune for a HoloLens competitor. That, plus new leadership with competency in enterprise sales clears the path for Magic Leap’s potential comeback. Now it’s all about execution.
Meanwhile, there are pockets of AR glasses progress beyond the big names above. For example, Tilt Five continues to reach milestones for its innovative and purpose-built communal gaming approach to AR glasses. We’ll continue to see several approaches as the market materializes.
We’ll pause there and circle back in the next installment with another XR sector snapshot.
