At the start of 2023, the wearable tech industry returned to reality with several big players now facing challenges in creating compelling products and meeting the considerable hype. Low demand and the slow development of compelling use cases, coupled with the high cost of augmented reality (AR) and virtual reality (VR) devices, have hindered the progress of the industry. Companies that find a niche and create useful cases will thrive in the market.
Tech giants facing setbacks in the wearable tech market
Several tech companies arefacing setbacks as many of their wearable devices fail to live up to the promises made. Microsoft, a leader in the AR headsets market, is struggling to find buyers for its HoloLens headset due to its high cost and limited use cases. It is also reportedly struggling to meet the technical requirements of the US Army; Congress blocked Microsoft’s $400 million deal with the US Army to buy around 7,000 HoloLens headsets as soldiers experienced nausea and headaches. In addition, the departure of the chief architect of HoloLens, Alex Kipman, in June 2022 has made the device’s future uncertain. Additionally, the 10,000 layoffs announced by Microsoft in January 2023 in its global workforce have impacted its HoloLens team as well.
Meanwhile, Apple has indefinitely delayed the launch of its AR smart glasses product, which was expected to release in 2023, due to technical challenges. This raises questions about the viability of AR smart glasses, especially due to low demand in the consumer market. Apple, however, is expected to release a mixed-reality headset instead in 2024 or 2025.
Demand for AR and VR devices remains limited
AR and VR have advanced over the years, but their widespread adoption remains a distant reality due to limited use cases and high cost.
GlobalData’s Thematic Intelligence: Tech, Media, & Telecom Predictions 2023 report reveals that consumer spending on expensive, non-essential products (smartwatches, VR headsets, and AR headsets) will remain flat due to the threat of global recession, growing unemployment, and depleted disposable incomes in H1 2023. As the market stabilizes in H2, new use cases and affordability could drive up demand for the devices.
Opportunities for smaller companies
As Big Tech companies continue to fail to live up to the hype, opportunities will arise for smaller companies (e.g., Vuzix, Rokid, Varjo, Magic Leap, RealWear, and Shadow Creator) to gain share in the wearable tech market. Creating devices that can be used for longer, are lightweight, and have practical use cases will help these companies generate demand and revenue.
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Varjo, for example, has found success in architecture, engineering, and automotive design, where visual quality and accuracy are crucial. It is collaborating with 25 Fortune 100 companies across several business areas. The company has been able to justify the high cost of its device by offering a more realistic and immersive VR experience with a focus on visual quality, eye-tracking, and foveated rendering.
Wearable tech companies must recalibrate ambitions
Big Tech companies will need to rethink their strategies in order to gain widespread acceptance within the market. Magic Leap, for instance, pivoted to the enterprise market in 2019, having failed in the consumer space. It launched its enterprise-focused headset in September 2022 to compete with Microsoft’s HoloLens 2. It is working with enterprise customers (healthcare, manufacturing, and public sector) and developers to create new AR opportunities. In January 2023, the Magic Leap 2 headset received IEC 60601 certification, which allows the device to be used in an operating room and other clinical settings.
Creating a niche, opening platform for developers to create content, and devising more compelling use cases, will help companies drive up the adoption of their wearable devices.