The technology landscape is witnessing a remarkable transformation, with 2024 poised to emerge as a groundbreaking year for both artificial intelligence (AI) and extended reality (XR). While AI continues to dominate in scale and influence, XR is stepping into the limelight, capturing attention with its rapid growth and attractive market trendsIn this evolving ecosystem, XR seems to have found its optimal moment for development, driven by increasing interest and investment from various stakeholders.

XR, defined as an umbrella term encompassing virtual reality (VR), augmented reality (AR), and mixed reality (MR), has experienced a tumultuous journey throughout its existenceHowever, recent technological advancements have forged distinct pathways for different XR technologiesIn China, the VR market appears to be on a downward trend as limitations in user experience and a lack of compelling content lead to a decline in consumer interest

On the contrary, the AR sector is witnessing unprecedented growth fueled by investments, innovative products, and technological advancements, creating a compelling vision of replacing smartphones as the primary device for digital interaction.

Notably, the integration of AI with AR technologies has catalyzed a new wave of possibilitiesLi Hongwei, the founder of Thunderbird Innovation, suggests that the combination of AI and AR is the ideal recipe for the next generation of smart platformsBuzz surrounding products like the Ray-Ban Meta eyewear has also contributed to turning heads toward AI glasses, establishing them as a significant trend early on and positioning them to become one of the hottest industries by mid-2025.

Despite the promising developments in AR and AI, it is a bittersweet reality that Chinese startups find themselves at the forefront, competing against tech giants like Meta and Apple

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As the competitive landscape intensifies, the entry of top-tier domestic enterprises into the XR arena has only commenced.

The VR market is experiencing a downturn, and Apple’s aggressive strategy has not delivered the expected resultsUnlike previous years, where negativity permeated the XR sector, 2024 seems to herald a wave of breakthroughs and positive changesCompanies are adjusting to this shifting industry paradigm; notably, OPPO has suspended its XR business, redirecting personnel to its AI divisionAccording to OPPO, AI is a strategic technology that will lead the future, and this pivot aligns with ongoing explorations into innovative hardware and software solutions pertaining to this burgeoning fieldSimultaneously, the company plans to sustain its commitment to AR and other frontier technologies.

Globally, VR retains a significant share of the market; however, changes in the Chinese market are signaling a shift

Starting from the latter half of 2023, AR sales began to surpass VR sales onlineBy mid-2024, AR has claimed 55.5% of the overall XR online market share—a remarkable jump from just 30.6% during the same period last year.

Understanding the decline of the VR market can be attributed to several factors, primarily the restricted availability of engaging content and a higher price point which dampens consumer enthusiasmContributing to this decline is the challenge VR faces in finding a harmonious intersection with AI advancements for co-creation of new value, compounded by inadequate hardware support for the existing VR experience.

Meanwhile, the MR landscape, bolstered by Apple’s influence, has become a benchmark within the industryThe Apple Vision Pro's launch in January 2023 created waves, with the device selling out in under twenty minutes and overwhelming the official website

However, as enthusiasts rallied for the experience, the reality is that the audience for Apple’s premium product is limited, and the device may struggle to maintain momentum.

Counterpoint’s senior analyst Harmeet Singh Walia highlights that the initial iteration of the Vision Pro headset will mainly appeal to ardent Apple fans and developers rather than the broader consumer marketReports suggest that since mid-2023, Apple has significantly reduced its production of the Vision Pro and may cease production of the current model by the end of 2024. Anticipation is rising for a second-generation device expected to launch in 2026, focusing on both premium and mainstream market segments.

Whether Apple can replicate the success of its previous devices in the MR sector remains to be seen, but one clear factor is the influence of pricing on consumer decisionsMeta has demonstrated the impact of affordable pricing in this arena, with the Quest 3S generating an impressive market share of 73% in VR and MR sectors, chiefly due to its more accessible $299 price tag.

Despite Apple’s struggles with the Vision Pro, its brand equity has undeniably sparked unprecedented activity within the XR domain, particularly for AR

A notable investor emphasized that in a climate of tightening funding, Apple's involvement has reinvigorated interest in AR, consolidating approximately $1.2 billion in funding for the VR/AR sector in 2024 aloneNumerous domestic companies, including Thunderbird Innovation, XREAL, and Rokid, have secured multiple funding rounds.

Li Hongwei echoed this sentiment, citing that the Vision Pro, despite its hurdles, has established a vital ecological foundation for the industry and serves as a key moment in time that validates the sectorAccordingly, 2024 appears to hold promise for growth within the AR sphere, ushering in more positive investments and outcomes.

The trajectory of AR in China is decidedly on the upward swing while the VR sector faces a contrasting declineInsights from RUNTO Technology show that AR glasses online sales reached 16,000 units and 26,000 units in October and November 2024, respectively, representing a staggering increase of 40.3% month-on-month

Such figures position AR devices to encapsulate a substantial market share within the XR cumulative sales.

As the XR sector continues to evolve, the dynamics between national and international players are revealing inherent differencesWhile global giants like Apple, Meta, and Google strive to stake their claims within this burgeoning space, helmed by their advanced resources, many domestic companies operating for less than a decade are steering an uphill battle against these formidable forces.

Historical trends in industries such as smartphones reveal that Chinese firms typically capitalize on existing market maturity, aligning with a more cautious yet opportunistic approachThis contrast highlights the ability of local enterprises to thrive despite external pressures, a phenomenon exemplified by Xiaomi and its remarkable journey from humble beginnings to industry frontrunner.

Despite the inherent challenges, industry leaders remain optimistic, with many recognizing that patience in navigating the murky waters of technological development may yield favorable outcomes in the long run

As XREAL's founder Xu Chi aptly summarized, while the construction crews may prioritize higher-profile tasks, the belief remains that the light at the end of this interminable tunnel is bright.

As the ecosystem surrounding XR develops, it fosters a convergence of brands and sectors, with traditional manufacturers increasingly exploring this intersection for new opportunitiesFor instance, in 2023, Xingji Meizu launched a light guide AR glasses whose reception indicated potential growth, markedly achieving a dominant position within their price range, commanding 41.5% of the market share for prices ranging from $290-450.

With competition intensifying, the pricing of AR glasses is moving into accessible territory, with products like Thunderbird Innovation's Air3 priced at an attractive $229, focusing on core features such as enhanced viewing experiencesThis shift has led some to speculate whether a full-blown price war is on the horizon

Li Hongwei has noted that pricing should correlate with the value delivered to users.

As brands vie for consumer attention, the anticipated introduction of new eco-systems—using platforms such as Apple’s Vision OS, Meta’s Horizon OS, and Google’s recently unveiled Android XR—sets the stage for the expansion and evolution of the XR ecosystemWith the involvement of major players like Qualcomm, it stands to guide AR technologies toward mainstream adoption.

Looking ahead, the integration of AI into eyewear stands at the forefront of innovation yet brims with hurdlesAI glasses, devoid of display capabilities, represent a transitional category allowing users to engage with AI in everyday contextsEmerging research anticipates that the global AI glasses market could exceed 3 million units by 2024 and rise to 10 million units in 2025, thereby implying significant penetration in the overall market.

AI glasses are positioned as a burgeoning segment, presenting an opportunity akin to a fashionable, tech-infused accessory—drawing comparisons to TWS earbuds

The lower production costs and the convenience of traditional eyewear fit make them an attractive option to consumersPredictive sales for Ray-Ban Meta glasses have already reached 200,000 units, positioning AI glasses as a prominent choice in the consumer tech landscape.

Nonetheless, skepticism persists concerning the quality and efficacy of AI glassesAs Xu Chi noted in a discussion, many attempts to manufacture AI glasses lack the nuanced understanding of technological function, with numerous offerings resembling rudimentary knock-offs of the Ray-Ban MetaThis desire for differentiation heightens the importance of not treating smart eyewear merely as consumables, as achieving genuine intelligence requires substantial innovation efforts.

While enthusiasm permeates discussions surrounding AI glasses, the sector finds itself contending with industry saturation and the pressure to produce standout products

Certain enterprises are rushing to capitalize on popular trends, leading to a fragmented market landscape that may ultimately face significant consolidationAccording to XR industry investors, only those brands capable of striking a balance between technological fervor and market prudence will endure in this competitive environment.

To optimize the experience surrounding AI glasses, brands must hone their approach to AI functionalities, tailoring their solutions to specific user scenarios while leveraging exclusive algorithmsSuch customization aims to enhance critical features, including accuracy in translation and the capture capabilities of AI glasses while honing in on their ability to interpret and understand viewed subjects.

On the design front, emerging AI eyewear must demonstrate a balance of aesthetics, comfort, and utility, responding to the technical nuances necessary for both eyewear and smart device functionalities

Traditional eyewear's expertise is paramount to ensure that AI glasses not only serve as smart devices but also fulfill their core role as functional eyewearPartnerships between tech brands and traditional manufacturers are proving prudent strategies as seen in Meta's choice to collaborate with Ray-Ban, affording them access to expertise in both technology and consumer desires.

As Year 2024 closes, several brands are gearing up to unveil their AI eyewear products, though most will hit the market in early 2025, which coincides with an anticipated maturity in supply chainsA wave of products for immediate lucrative sales is plausible as numerous newcomers may resort simply to purchasing third-party solutionsObservations within the industry reveal that it is essential to create a blockbuster product or risk rapid elimination from the competitive landscape.

By 2025, the anticipated clash over AI glasses is expected to resemble an arms race, wherein the performance metrics of dominant players—traditional AR brands versus new entrants like Baidu—will dictate market leadership