Making Sense of the Virtual Reality Market in 2023

Apple is the topic du jour in the Virtual Reality (VR) market currently, and for good reason. VR has been somewhat stagnant with Meta dominating over the past few years through its Quest lineup. With Apple’s entrance, new hardware, alongside well-known software and content, will be available through Vision Pro. At the least, Vision Pro has injected some hype back into the Extended Reality (XR) space, with consumer and enterprise segments showing interest. Initial feedback has been very positive, outside of the US$3,500 price tag, but hands-on time has been very limited so far. Early 2024, after Vision Pro launches, will be a better indicator of the device’s—and more broadly, Apple’s—potential in the XR space.

Enterprise adoption of VR continues to grow steadily as well. Remote workforces have brought significantly more attention to many segments within the VR market, including collaboration, training and education, remote therapy and telehealth, and productivity/planning (e.g., Three-Dimensional (3D) visualization and working with 3D models, layouts of manufacturing lines).

This blog post will extrapolate and contextualize some of the key market forecasts from our recent VR research products.

How Big Is the Virtual Reality Market?

The virtual reality market is valued at US$16.6 billion in 2023, according to ABI Research’s most updated forecasts. This market valuation is based on VR software and services, as well as VR hardware. While software and services will generate US$9.7 billion in revenue in 2023, VR Head-Mounted Display (HMD) hardware sales will generate another US$6.9 billion. Standalone HMDs, such as Meta Quest 2, Meta Quest Pro, PSVR2, and new products like Apple’s Vision Pro and others from HTC and Pico, remain the dominant form factor for VR, accounting for 73% of total VR HMD revenue and 78% of HMD shipments this year.

As the metaverse (i.e., immersive collaboration, virtual training, simulations, virtual offices, VR retail) is further hyped, demand for VR hardware and software/services will soar. By 2030, the VR market size will catapult to a staggering US$214 billion.

Table 1: VR HMD Revenue (US$ Millions) by Form Factor

VR Hardware Shipments by Region

More affluent regions like North America and Western Europe make up the bulk of global VR shipments. Consumers and enterprises in these regions are more resistant to tight macroeconomic conditions than their lower-income counterparts. North America will ship 8.2 million VR headsets in 2023, while Western Europe will ship 4.0 million units.

In Asia-Pacific, notably China, VR is taking longer to mature than once anticipated. However, it’s still a significant regional market based on sheer population numbers alone, spurred further by technology-first trends and a prominent enterprise presence. This year, we expect 5.1 million VR HMDs to ship in the Asia-Pacific region.

By 2030, ABI Research projects these regional numbers to increase to 36.4 million for North America, 20.4 million for Western Europe, and 31.4 million shipments for Asia-Pacific.

Table 2: VR HMD Shipments (Thousands) by Region, World Markets: 2023 to 2030

Education and Consumer Are the Most Significant Market Segments

Economic headwinds and budget/culture concerns will deflate the market potential for the education sector in the short term, but it will ultimately outshine every other VR segment. According to our virtual reality market forecast, the education sector will overtake the consumer space as the biggest revenue opportunity (US$17.3 billion) for VR software and services in 4 years. Moreover, as table 3 depicts, the education vertical is anticipated to be the biggest total revenue generator (US$62 billion) in the VR market (including hardware, software, and services) by 2030, followed closely by the consumer space.

Whereas education has a broad range of use cases for virtual reality, the consumer domain remains tied primarily to just gaming. Nevertheless, the consumer segment will continue to be the biggest total VR revenue segment through 2029.

Table 3: Total VR Revenue (US$ Millions) by Vertical, World Markets: 2022 to 2027

Looking Ahead

VR growth previously expected to take more than 5 years to unfold is now included in our market forecasts. Most notably, the demand for VR-enabled immersive collaboration software and services has seen an uptick recently. Enterprises and consumers alike have shown buy-in to the fusion of the physical and virtual worlds, which is only exacerbated by increased remote work in enterprise and increasing XR efforts from tech giants like Apple.

Education will contribute the most to the virtual reality market growth, driven by more favorable price points and ease of use. With more standalone HMD product offerings on the market, educators no longer have to deal with historically cost-prohibitive devices. Another growth factor stems from standalone VR hardware being easier for educators to set up than mobile devices.

While education will be the largest VR market vertical by revenue by 2030, other markets see faster growth. Manufacturing, retail, and energy see Compound Annual Growth Rates (CAGRs) near 70% through 2030. For manufacturers, the allure of virtual reality comes from being able to simplify increasingly more sophisticated workflows and environmental conditions by training employees with VR-based applications. This can get employees onboard or help them learn new concepts easily and quickly.

Location-Based Entertainment (LBE) is forecast to grow within the forecast window, but the effects of COVID-19 are still being felt, and this shows throughout the forecast. Strong momentum went to zero immediately, and many names in LBE did not make it out of the pandemic. Large potential entrants to LBE, like Disney, have been pulling back from LBE expansion as part of larger cost cutting measures across industries.

Finally, the next moves by VR market players are bound to send ripple effects throughout the industry. Apple’s 2024 XR device, Vision Pro, perhaps will be a tidal wave, given the brand’s sway and the device’s impressive features. Besides Apple, ABI Research also sees Qualcomm-powered devices, including Meta’s new devices, as well as “viewer” devices tethered to smartphones, playing a big role in the VR market going forward.

For more on the latest technology trends and market developments in the world of immersion, check out some other content ABI Research’s analysts have recently published.

Further Insight:

The Importance of Failure in the 2024 XR Market (Analyst Insight)

Defining The XR Experience Enabling The Immersivity Ecosystem (Whitepaper)

Balancing Growth and Differentiation: Navigating the XR Space (Analyst Insight)

Becoming a Data-Driven Organization as a Technology Vendor

04 Oct 2024

Identifying the Metaverse’s Technology Underpinnings and Real-World Applications

15 Aug 2024

How AR and VR Are Used for Remote Assistance and Management

26 Jun 2024

Technology Developments Observed by Our Analysts—March 2024

28 Mar 2024

CES 2024 Recap: Five Industry-Setting Highlights from ABI Research’s Analysts

09 Feb 2024

• Extended Reality (XR) Technologies