What They Say
I see a lot of forecasts for AR & VR and most of them I ignore. However, I saw one from Frost & Sullivan that forecast revenues of $661.4 billion of revenues by 2025, a CAGR of 86.3%. $161 billion will come from manufacturing which will exploit the technology alongside robotics in supply chains and manufacturing.
The analyst told us:
The high growth rate forecasted for AR and VR technologies is based on three fold drivers over the first half of this decade:
- There would be a sustained rise of contactless economy with the world fighting to contain Covid-19 and its variants completely. This scenario leads to a continued preference to contactless commerce through the first half of this decade. User Interface technologies driving contactless commerce such as AR and VR will gain strong adoption as companies would prefer them when they adopt new user interface technologies
- With large brands working on AR and VR headsets, which are likely to be launched in the near future, a sharp rise in interest and demand would be observed in AR and VR technologies. Tier 2 and Tier 3 players are likely to flood the market with less expensive variants leading to mass adoption of such devices among global population
- As 5G rollout continues, the necessary backend infrastructure will be in place when the demand for AR and VR devices peak in the market. 5G rollout will ensure that people will have a seamless immersive
We further asked about the forecast compared to the VR/AR Association number and we heard:
“One of our earlier 2018 report on AR/VR already had a market size estimate of $22 Billion by 2019. So our numbers are way different from his. The difference could be due to the underlying assumptions. Our estimate is driven by the assumption that the synergistic impact of all three drivers acting together will herald a breakthrough period of high growth rates for AR and VR technology markets. All three drivers are significant ones individually. Collectively their impact will be much higher.”
What We Think
This seems a particularly aggressive forecast and it would have been good to have got a bit more of an understanding of how the firm came to this conclusion. Working back from the CAGR, the forecast would suggest a market valued at $55 billion this year. That seemed very high to me so I contacted the analyst to get the clarification above. The VR/AR Association that we reported on a couple of weeks ago (New Report: VR Revenue to Reach $12.2 Billion by 2024) That trade association put the size of the VR market at just $4.8 billion this year and that ‘smells right’ to me.
Frost & Sullivan are generally considered a professional research company and it may well suit someone to buy its forecast to justify some kind of investment, but I really think that this forecast is outside my definitions. I really had assumed that there was some kind of decimal point error in the report. After all, that market size would be the equivalent of around three times the total sales in 2020 of Samsung by 2025! (BR)
