In the “low pressure” shrouded consumer electronics market, AR / VR devices have killed a straight up road.
At the end of July, market research firm IDC recently released a report showing that global shipments of VR headsets grew 241.6% year-over-year in the first quarter of 2022, and that VR hardware shipments are expected to reach 13.9 million units in 2022, up 26.6% year-over-year.
The significant growth in shipments has generated demand for more orders. Recently, a supply chain manufacturer told Gizmo: “As far as I know, several large Taiwanese OEMs, including PEGATRON and Quanta, have had good orders for VR-type devices in the recent past, and demand for parts has also grown significantly.”
There is no doubt that the increased competition in the supply chain brought about by the expansion of the market size is being staged.
Foundry market competition intensified
As we all know, Geer is the leading enterprise in the field of VR equipment in China. In addition to providing complete machine design and manufacturing services, it can also provide VR / AR-related precision optics, acoustics, sensors, precision structural components and other overall product solutions.
Thanks to the advantages of upstream and downstream integration, Geer’s market share has been growing steadily.
According to IDC data, Meta, Pico, DPVR, HTC and Akiyoshi account for nearly 99% of the market share, and the products launched by these brands are mainly mid- to high-end, and most of these orders are pocketed by Geer. By 2021, Geer’s products in the mid- to high-end market share of nearly 80%.
In the market oligopoly situation, other foundry companies want a share of the pie must show their own advantages. However, from the perspective of technology, yield and experience, it is difficult for any foundry to win compared with Goer, which has been laid out for more than ten years, and the simplest and most effective solution is to lower the price.
Industry sources pointed out to the set of micro network: “before the market volume is very small, even if the head of the customer orders add up, only 1, 2 foundry capacity to meet, there is almost no very fierce competition; now ‘cake’ big everyone wants to share, killing, grab single naturally also appeared.”
“If PEGATRON, Quanta, the increase in orders from these manufacturers, on the one hand, the overall demand of the terminal has become larger, on the other hand, may be the supply chain order share has been adjusted. Because the end customer actually does not want to have a supplier for a long time a monopoly, which will also bring them risk.”
Obviously, the rapid expansion of the VR equipment market size is also accompanied by a change in the supply chain competition situation.
It is important to note that in 2023, Meta, Pico, Sony will launch the next generation of headset, Apple is also expected to release a mixed reality headset, several giants at the same time is expected to further expand the demand for components and foundry, which also means that there will be more companies to grab orders, 2023 is crucial for the layout of the supply chain manufacturers in related fields.
The pressure of profitability is transmitted to the supply chain
The AR / VR field has been able to attract many manufacturers to layout first, in addition to the industry prospects that everyone is optimistic about, but also in the early stages of industrial development, the product profit is relatively substantial. But as mentioned above, competition is intensifying as the market expands, and more and more manufacturers will get orders at lower prices, which will inevitably lower the overall gross profit level.
The aforementioned supply chain manufacturers told Jiwei: “We all know that before the AR / VR project volume is small, do less people also so high gross profit, but such a period no longer exists. Because the foundry wants that order, more or less will lower the price, then it is facing cost pressure, in order to protect their own profits can only press the supplier’s price. Just take some of the projects we have done recently, for example, that unit price is not even profitable.”
“From our point of view, in fact, now do VR parts is very much like the previous cell phone market. Because of the various links in the VR industry chain, the hardware, component-based products are not high technical barriers, I think at least the cell phone industry chain should have production capacity, and even some second-tier manufacturers can do, which also led to the fastest decline in profits of such components.” The other side added to.
Although the profit margin is very little, but had to do.
For the entire consumer electronics industry chain, the cell phone market is not known when the recovery, upstream and downstream manufacturers have to seek more ways to reduce risk, and VR devices right now, the “market” is just right. If the project is rejected because of low profits, miss the opportunity to increase market share, on the one hand, it is difficult for companies to find new market alternatives in the short term, on the other hand, it is possible to pass by the real “outbreak” of the industry.
At least from the point of view of the terminal action, foundry, components and other links in the next 2-3 years there are still many variables and opportunities.
On the one hand, the terminal brand represented by Meta is trying to increase its share while also trying to increase the price by launching headset devices “for professional scenarios”. In addition, with the release of Apple’s new products, it may bring more innovation and growth space to the device supply chain.
