New AR and VR HMDs Look to Secure Early Adopters and Prove Value above Existing Hardware

Rolling into autumn and looking out to the holiday season, there have been a handful of impactful immersive hardware announcements in the past month, with others all but confirmed for the next month. PICO, recently acquired by TikTok parent company ByteDance, launched its PICO 4 and PICO 4 Pro Virtual Reality (VR) headsets. Nreal launched its Air glasses in the general market in the United States. Lenovo launched a new enterprise VR headset in the ThinkReality VRX. Varjo received a fresh US$40 million Series D investment and while no new hardware was announced, the company has been gradually expanding its high-end VR footprint. Finally, and perhaps most notably, Meta confirmed its next-generation Quest Pro VR headset at its Meta Connect conference on October 11—with a premium US$1,500 price.

While much of the VR component hardware space has been stagnant, a couple standout advancements should be noted. First, new optics will be common going forward. Fresnel lenses have been the norm for VR, almost a necessary burden, rather than a benefit with weight, thinness, and visual clarity all sacrificed. Pancake lenses offer a potential next-generation optics solution and allow a lens to sit much closer to a display, reducing visual artifacts and the thickness and weight of the lenses. The new headsets from PICO, Lenovo, and Meta all have pancake lenses.

Second, passthrough cameras for VR headsets are becoming standard and improving on earlier versions. ABI Research has categorized these VR camera passthrough devices as “merged reality” to differentiate from true display passthrough in the case of Augmented Reality (AR) and Mixed Reality (MR) devices. The rate at which VR devices have added passthrough cameras has made merged reality basically the norm. Developers still need to learn to fully utilize the cameras, but from a hardware component perspective, the devices are capable of low-latency passthrough more often than not. Early reviews of the Meta Quest Pro laud its passthrough capabilities, positioning it closer to MR.

When it comes to AR, the story is more straightforward. Nreal Air is not the first consumer AR device, nor is it the most technologically impressive, but it is one of the first to have an actual shot at significant adoption. The price (US$379) is realistic, and device support across device types maintains a good addressable market. Nreal Air’s easy availability on Amazon is also a positive indicator for the company. Any devices that have come before targeting the consumer market have struggled to gather a notable user base and establish a high-volume storefront placement. North (acquired by Google) is an example of a good product hindered by very limited availability. While Amazon doesn’t offer the ever-important hands-on experience for immersive hardware, the reach and penetration it offers has not really been established by other consumer AR devices.

Because the market is still nascent and growing—even in the case of VR—expectations and acceptance of different price points have yet to be truly tested. The Meta Quest 2’s popularity can very much be connected to its affordability, even after a recent price hike. Its specifications were still competitive, with a price beating nearly every other similar competitor. As companies start pushing into the prosumer and professional space, price pressure is more significant. There’s only so much pure hardware innovation possible within the form factor, and only so much that customers will be willing to pay. Anything over US$1,000 is immediately operating in a more focused market, which is not an inherent disadvantage if expected (in the case of the enterprise sector), but can be challenging for anything targeting the mass market. Varjo, for example, has been targeting professional use from the beginning. For someone like Apple, which is expected to also target a high cost, but also high performance for its VR headset, marketing and go-to-market become critical for properly positioning the device.

With the Meta Quest Pro priced at US$1,500, there will need to be some significant proof of value, especially compared to the company’s own wildly successful Quest 2 at less than US$500. The device adds some new sensing technologies to capture eye, face, and expression data, which is useful for Meta’s broader metaverse ambitions, but the value of that to the end user has not been proven. Meta has the unique advantage of being both a dominant VR hardware incumbent and having a notable user base already—no other competitor can claim the same, at least not at a similar scale to Meta. On the chase for new users, having that existing user base is a boon, both for upselling existing users with new hardware and having them act as evangelists (hopefully) for the new product and associated content/experiences.

There is still suspicion around actual value for consumer AR hardware. Most consumer-targeted AR products have chosen a “second screen” go-to-market, positioned as an accessory more than its own experience. This makes sense from a pricing and addressable user base perspective, but that also comes with the added obstacle of convincing users it’s necessary—with no truly revolutionary or novel hardware. In the enterprise sector, this type of device can make more sense—Lenovo’s ThinkReality A3 has proven successful as a Three Degrees of Freedom (3DoF) tethered AR headset, but consumers may demand more, especially as more content and hardware competition arrives in the next few years.

There has not been enough competition in Extended Reality (XR), thus far, to identify and test price points, capabilities, and user sentiment. With proper marketing and positioning, nothing is off limits; however, as these new devices start pushing boundaries to both fact find and, hopefully, sell units, growing pains are expected.