Insight

Analysis of the AR/VR Value Chain in China: Is China at the forefront of the industry?

April 26, 2023

The AR/VR (Augmented Reality/Virtual Reality) hype in China has gone through two waves of growth, despite the current relatively small market size. The market and investment hype in China has waned and returned to a more rational level since the beginning of 2023. This can be attributed to the dismal profitability of internet giants under macroeconomic pressure and the underwhelming sales performance of VR devices.

Exhibit 1: Development stage of the AR/VR Industry in China

Source: Counterpoint Analysis Nonetheless, China's national government has recognized the long-term potential of XR (eXtended Reality) technologies, with the XR industry prioritized as one of the top seven key industries to constitute the digital economy of China in the country's 14th Five-Year Plan. Recently, CAICT (China Academy of Information and Communications Technology) has also introduced action plans to foster the integration of virtual reality technologies (including augmented reality and mixed reality technologies) and vertical applications from 2022 to 2026. The development of VR glasses took off in China in 2016, with standalone devices becoming mainstream in 2019. As of 2023, we are seeing the market frenzy for VR devices subsiding, with the industry waiting for the introduction of Apple's first MR headset. Meanwhile, the development of AR glasses is still at an early stage, with only limited products available in China prior to 2022. However, since 2022/2023, we are seeing more products being commercialized. Regarding the XR device value chain, Chinese companies dominate in certain technology aspects, such as the optic and display solutions, battery, and ODM & EMS (Original Device Manufacturer/Electronics Manufacturing Services), but still lag behind in the development of SoC (System on Chip), connectivity, memory, as well as some areas in the sensing and interaction technologies.

China AR/VR value chain Source: Counterpoint Analysis

In the following sections of this report, we will present an analysis of the development of China and key Chinese players in the core AR/VR technology domains.

SoC: Qualcomm clearly leads with the first-mover advantage

Before 2018, most AR/VR headsets in the market were supported by Qualcomm’s Snapdragon mobile platforms and its bundled XR SDKs. Following the launch of the Snapdragon XR1 Platform, popular VR headsets both domestically and internationally were predominantly developed on Qualcomm’s dedicated XR platforms. Compared to Chinese counterparts, Qualcomm’s XR chips offer distinct advantages in terms of computing power, GPU rendering capabilities, connectivity, and the overall hardware-software integration solutions. Chinese companies, including mainland China players Rockchip, Allwinner Technology, Hisilicon, and Taiwanese player MTK, have developed products for AR/VR headsets. However, only MTK’s VR SoC was adopted by leading player Sony, while solutions developed by mainland China companies were primarily utilized in lower-tier devices featuring VR videos. Apart from MTK, China currently lacks a competitive AR/VR SoC provider capable of challenging the dominance of international players like Qualcomm and Samsung. While Chinese players such as Rockchip, GPT, and Rokid have announced their ambitions to develop more advanced AR/VR chips, it remains uncertain whether or when their efforts will pay off.

Development of players in the SoC technology of AR/VR

Source: Qualcomm, MTK, Hisilicon, Allwinner, Rockchip, Counterpoint Analysis

The following sections of the report will cover our analysis on various AR/VR technology domains, including optic technologies such as Fresnel lens, pancake solutions, birdbath/freeform optics/waveguides solutions, display technologies such as Fast-LCD, OLED, L-COS, Micro OLED, Micro LED, sensing & interaction technologies like rotational and transitional movements tracking of head and controllers, hands recognition, eyes tracking, video see-through, connectivity/memory/battery technologies, ODM/EMS services, as well as the global supply ecosystem and the latest development of Chinese companies in these domains. To access the full report, please click this link, or contact [email protected].

Receive our insightful weekly newsletter and stay ahead of the competition.

Author

Flora Tang

Flora is a Principal Analyst at Counterpoint Research, based in Hong Kong. With over nine years of experience in the mobile industry, she specializes in analyzing the consumer electronics market and the Chinese supply chain. Flora has held various roles in the market intelligence and business strategy functions with leading Chinese smartphone OEMs, internet company and telecom operator. She initially joined Counterpoint Research in 2017 but later moved on to play key roles in OPPO’s international business strategy in 2021 and HONOR’s corporate strategy planning in 2022. Flora has since returned to Counterpoint, where she now serves a broader array of global technology players. Academically, Flora holds a bachelor’s degree in International Relations from Sun Yat-Sen University and a master’s degree from The Chinese University of Hong Kong.