Meta, Apple, and Xiaomi are in a fierce competition in the XR market. Who will be the real winner of the "AI glasses revolution"?

Investment Notes is GGV Capital's insights, observations, and thoughts on investment, business, and technology, exploring everything about the world.

Here, you can gain:

Management experiences and first - hand research of global leading technology companies;

Experience sharing from top venture capitalists and entrepreneurs;

World humanities, history, and business insights from the era of exploration...

The following is the 221st issue of the Investment Notes series.

A few days ago, at Xiaomi's "Full Ecosystem Launch Event for Cars, Smart Homes, and More", besides the Xiaomi Yu 7, Xiaomi also made its debut in the AI glasses market. The glasses are priced from 1,999 yuan and are specially optimized for Asian face shapes. Compared with other smart glasses, the price is quite friendly.

A few days ago, at Xiaomi's "Full Ecosystem Launch Event for Cars, Smart Homes, and More", besides the Xiaomi Yu 7, Xiaomi also made its debut in the AI glasses market. The glasses are priced from 1,999 yuan and are specially optimized for Asian face shapes. Compared with other smart glasses, the price is quite friendly.

What does consumer - grade XR glasses mean to people?

Pay attention. This is Xiaomei, and that is Xiaoshuai. They both see a stray cat on the street. Xiaoshuai takes out his phone, takes a photo of the stray cat, and then uses an image - search tool to find out the breed of the cat. Subsequently, he searches for relevant keywords to learn about its habits. As for Xiaomei, since she is wearing XR glasses, with just simple voice commands, almost at the moment she sees the stray cat, she gets all the information that Xiaoshuai obtained through the above operations.

This is a usage scenario we casually imagined based on our understanding of consumer - grade XR glasses. People may think this is a story about improving the efficiency of information acquisition. That's right, but not entirely. Efficiency is, of course, an important indicator to measure the quality of a tool. And we have seen too many times that when the improvement of efficiency breaks through a certain threshold, it may bring qualitative changes to individuals and society.

Regarding XR glasses, the phrase "what you see is what you get" may have acquired a strong "advertising flavor" due to its wide application in the marketing field, and people may have gradually lost their awe of its underlying meaning. But many people seem to have forgotten one thing: We humans, and even any living organisms, often operate on the principle of "what you see is what you get" in the process of survival and development.

Let's take a simple example. At a busy intersection with complex traffic conditions, a novice driver may only notice one thing: there are so many cars and so many people! While an experienced driver waiting for the traffic light to turn green at the same intersection may have already had the following reactions in his mind instantly: the car in front is starting slowly, indicating that the driver is not very focused; the car behind is honking, suggesting that the driver is impatient; the car at the left - rear may have taken the wrong lane and is preparing to change lanes; the food delivery guy at the left - front doesn't seem to intend to follow traffic rules and is about to run a red light; the old man on the right is also eager to cross, but judging from his expression and movements, he will probably wait for the green light obediently; there is a stray cat crossing the road at the ten - o'clock direction, and it's likely not to be hit, hopefully other cars have also noticed it...

Facing the same "what you see", novice and experienced drivers won't get the same "what you get". Consumer - grade XR glasses, whether in the AR or VR field, can instantly turn an ordinary person into an "experienced driver" in daily life, enabling people to analyze more abundant and accurate information from the images they see. And yes, this is not limited to the driving field. A homebuyer can also use XR glasses to have an immersive and detailed understanding of a property he is interested in from afar. The amount of information he can obtain may even exceed that from a real - estate agent - led on - site visit.

The human eye is the most important organ for an individual to connect with the outside world. If the eyes are powerful enough and the information - processing ability from the eyes to the brain is strong enough, it will be of great significance to individuals and social communities.

The market significance of consumer - grade XR glasses is no longer limited to entertainment functions such as playing games and watching movies. Its impact on the real world and the qualitative improvement of human innate abilities are what really excite us.

The core technologies behind today's XR glasses

From the perspective of the supply chain, currently, the three most significant technology segments behind XR glasses are optical technology, display technology, and chips.

In terms of optics, the Birdbath solution, which belongs to geometric optical technology, has a higher shipment volume at present. However, many people believe that in the future, this field will be dominated by waveguide - based technology. Waveguide technology can be further divided into array waveguide and diffractive waveguide. Of course, the technology routes here can be further subdivided. For example, diffractive waveguide can be divided into different routes such as nano - imprint lithography and volume holography.

In terms of display, the combination of Micro LED technology and waveguide technology is considered the standard for the next - generation optical display unit. In addition, there is also the Micro OLED technology that matches Birdbath, the LCoS technology that Meta, Huawei, etc. are exploring, and the DLP technology, etc.

Considering both optics and display, there are two mainstream technology routes. One is the VST route represented by Apple Vision Pro. Through dozens of cameras, it projects the outside world after shooting, rendering, and simulation onto the internal lenses, forming a device similar to VR. The other route is called OST, which is closer to the form of ordinary glasses. Users can see both the virtual images projected on the optical screen and the real world through the lenses.

On the OST technology route, many mainstream manufacturers mainly use the Micro OLED + Birdbath solution, which is based on the principle of imaging with a beam - splitting curved mirror. It has good display effects, a very mature supply chain, and good mass - production capabilities and cost control. With its strong portability, it can meet the current needs of users in scenarios mainly focused on gaming and watching movies. However, it still has some drawbacks in terms of product weight and in - eye brightness. The weight can reach 70 - 80 grams, there are obvious rainbow patterns, and the light efficiency is relatively low.

If the waveguide solution is adopted, the glass process and light efficiency will be better, but the yield rate is currently low. In the future, if sunglasses and sports glasses need to be equipped with more complex display functions, the waveguide route is likely to take the lead.

In terms of chips, it mainly includes chips for the computing unit, chips for the storage unit, and some vision or acoustic chips related to sensing. Taking Apple's Vision Pro as an example, the two chips that people often talk about are M2 and R1. M2 is, in a broader sense, a computing chip with strong processing capabilities to handle a large number of tasks. The current mainstream MacBook is equipped with the M2 chip. At the same time, the R1 chip has also received a lot of praise. Its main function is collaborative processing, mainly solving vision - related problems. It enables Vision Pro to achieve a very high refresh rate in terms of visual delay, thus minimizing the sense of dizziness. In addition, there is also a neural network processing chip called NPU in XR glasses, which can provide acceleration for neural network processing.

Of course, the specific technology used by manufacturers to equip the XR glasses they produce still depends on their product positioning. If they want to create a phenomenal product that offers consumers an "all - in - one" experience, then higher - specification technology supply is required. However, if they are making a more niche XR product, such as XR glasses for cycling that only need to provide simple text and image information with a single - green display, then an IoT chip is sufficient to meet the needs.

The current market situation of consumer - grade XR glasses

In the XR glasses market, AR and VR can be divided into two industries. The global shipment of AR glasses was about 500,000 units the year before last. The overall scale of the VR glasses market is much larger than that of AR. For example, the year before last, the shipment of VR glasses reached 7.5 million units, 15 times that of AR.

However, from a dynamic perspective, in the past 8 - 9 years, the average annual growth rate of AR glasses shipments has been close to 40%, while that of VR is only a little over 20%. Moreover, the shipment of VR glasses has decreased from nearly 10 million units in 2021 - 2022 to 7.5 million units.

Why has such a change occurred? On the one hand, the maturity of the AR glasses supply chain has led to a reduction in BOM costs, and the terminal price has dropped to the level of two or three thousand yuan. At the same time, the matching degree between AR technology and user usage scenarios is relatively high. Especially in gaming and movie - watching scenarios, people generally can accept wearing a 70 - 80 - gram portable screen. In addition, Chinese users have a significant impact on the global AR glasses market. In the global consumer - grade AR glasses shipments the year before last, the Chinese market contributed 40%. This is also related to the fact that the supply chain of the core optical and display unit modules of AR glasses is mainly in China.

On the other hand, with the global economic downturn, markets like VR with shipments in the tens of millions will be more affected. In contrast, emerging markets like AR are less likely to be affected. Moreover, the core usage scenario of VR glasses is gaming, and game users do not change their hardware devices very frequently. The VR market has reached a certain bottleneck in attracting early - adopters. Third, the brand concentration of VR devices is very high. The largest foreign brands are Meta and SONY, and in China, it is PICO. PICO accounts for about 60% of the domestic VR market, while Meta and SONY account for 50% and 30% of the international VR market respectively - this is obviously an oligopoly market. And these companies have also reduced their investment in the XR track in the past few years. Relatively speaking, the market pattern of AR glasses has not yet taken shape, and there are more diverse participants in the market, making the future of the AR field more promising.

Under such market conditions, there are three consumer - grade XR glasses worth paying attention to. First, of course, is Apple's Vision Pro. Its strength lies in its amazing display effects, which can currently make up for its shortcomings in price, weight, and comfort. With Apple's strong brand appeal, it achieved a shipment of 500,000 units last year, which is a strong competitor in the AR - oriented XR glasses track.

Second, are the glasses using the Birdbath technology route. They mainly serve as a portable effect - enhancing device in gaming and movie - watching scenarios, and hundreds of thousands of sets were sold in China the year before last.

The third one is the smart glasses jointly developed by Meta and Ray - Ban. The single - quarter shipment in Q4 of the year before last exceeded 300,000, and the cumulative shipment has exceeded 1 million. It integrates earphone functions into the temples and also adds photo - taking and video - recording functions to what seems to be just a pair of traditional sunglasses, perfectly implementing the "addition concept" of AR glasses. It is particularly worth noting that Meta has an open - source model LLaMA, which is considered by many to be a powerful competitor to OpenAI, making the potential of its products in the field of artificial intelligence not to be underestimated.

What will the future of consumer - grade XR glasses be like? Will it continue to bring more amazing experiences in the entertainment field? Will it be integrated into people's daily lives, enabling users to "physically" shop, view properties, and meet friends from afar? Or will it become a new - generation efficiency tool to boost the productivity of more office workers? We believe that demand is not created unilaterally. XR will have positive interactions with every individual and even the era, leading to amazing ideas and solutions.

*The cover image and the header image are from "ivy".