By | November 12, 2023
The Nidoran character in Nintendo Co.'s Pokemon Go augmented reality game, developed by Niantic Inc., is seen in front of a stable on a smartphone

You are never far from a screen in today’s world. But we’re getting closer to the point where, instead of staring down at a phone or tablet, you can simply look ahead through a digital lens to find the information you’re looking for.

Global tech giants, including Apple, Meta and Microsoft, are racing to create the hardware that will drive the so-called “immersive era” – when augmented and virtual reality begins to interact with daily life, radically changing both work and play.

“Immersive tech will touch every part of our economy,” says Jessica Driscoll, head of immersive technology at innovation center Digital Catapult. She predicts a “big push” for technology to be used to make the design and manufacture of goods more efficient, and to enable a more environmentally sustainable way of cross-border collaboration.

Consumer spending on VR is expected to triple by 2027, reaching $5.7 billion globally, according to tech consultancy Omdia. It will reach $2.83 billion in the US and $458 million in China by 2027, Omdia predicts.

But the true potential of immersive technology still needs to be unlocked, as developers grapple with the challenges of miniaturization, design, and making disparate hardware and software compatible.

AR involves combining an image of the real world with 3D graphics, while VR involves creating a completely virtual world. An early version of the latter was pioneered by General Electric in the 1970s to make a flight simulator to train pilots. But it has only relatively recently found wider use among consumers, and the frequency of use is still low.

“The past 10 years have ushered in a new era in the commercialization of VR but we are still in our teens,” admits Tuong Nguyen, a new technology and trends analyst at consulting firm Gartner. “It’s a small market but growing quickly,” he says, adding that consumer use is usually sporadic and on a limited basis.

AR is already a common feature in apps that use smartphone cameras or photos. Examples include visual translation apps; playful face filters on photo apps like Instagram; shopping apps that put pairs of glasses on your face or furniture in your living room; and the cult 3D game Pokemon Go.

Pokémon Go in action on the streets of Hong Kong © Anthony Kwan/Bloomberg

However, VR has made some more inroads into workplaces, as headsets have become a key tool for specialist training. For example, BP uses them to train oil rig workers, avoiding the time, cost and safety risks associated with training at an offshore facility. Designers at Ford use them to test new car shapes, instead of making models out of clay.

However, augmented reality – a complex mix of the real and virtual worlds – is likely to have the biggest impact on capital-intensive heavy industries, such as construction and maintenance, where people are involved in “busy jobs and need just-in-time information,” Nguyen explains.

The next technological growth markets in AR and VR

Countries to watch 2023-2027

USA A hub for AR/VR innovation, Meta will continue to invest, innovate and drive sales. The launch of Apple Vision Pro will add to the excitement and interest.

UK With a thriving ecosystem of studios and companies, the UK is poised to lead the European market in these areas.

China Despite its fragmented market today, China will emerge as one of the industry leaders, led by major players such as ByteDance.

Japanese Japan, driven by Sony’s PSVR2, will become the second largest VR market in Asia after China, with a growing AR/VR presence.

Source: FT-Omdia Digital Economies Index

Microsoft’s HoloLens 2 headset is sold in the manufacturing, construction and healthcare industries. Mock-ups show a person fixing a machine during a video call with someone giving instructions.

However, currently the most widespread application of VR has been centered around gaming. “The number one reason people buy these devices is gaming,” notes George Jijiashvili, senior principal analyst at Omdia. This month, Meta released its Quest 3 headset, which, priced at $499 in the US, has piqued the interest of game developers.

Still, Jijiashvili says, “I want to emphasize that as much as this is a matter of hardware progress, which is happening, we’re seeing much slower progress in terms of content and use cases. This is the biggest challenge facing VR right now.”

Additional use cases are emerging in the automotive sector. Car manufacturers are using AR and VR to develop the next wave of in-car entertainment systems, as well as provide route navigation.

Ford, Volkswagen and BMW are enthusiastic about VR but it is the Chinese automakers that are “very willing and aggressive” in their partnerships, said David Tett, principal analyst at Omdia.

Auto companies’ move toward immersive technology has been accelerated by the arrival of electric vehicles. But the rise of autonomous cars will spur further demand for in-car diversions, from movies to karaoke.

“That’s where these car companies now see their long-term future: selling you an entertainment package to effectively enable media apps in the car,” says Tett.

Eventually, however, tech experts predict that the line between AR and VR will blur — and they see the launch of the Apple Tech Vision Pro headset as an important milestone on that path.

The new Apple Vision Pro headset is shown during the Apple Worldwide Developers Conference
The new Apple Vision Pro will be presented in June © Justin Sullivan/Getty Images

Apple’s headset will be released early next year and is expected to cost $3,499, offering both VR and AR to create “spatial experiences.” What looks like a pair of sci-fi ski googles is actually a sophisticated laptop computer.

The Pro’s predecessors include the Oculus Rift and Metaquest 3 headsets, but according to Driscoll at Catapult, the Apple tech Vision Pro is a “step up” in terms of design. Another big advantage is Apple’s ecosystem, which can give headset users access to pre-existing apps built for the company’s other devices.

Currently, however, Meta dominates the consumer VR headset market, with a 71.8 percent share, followed by Sony at 8.8 percent and Valve at 2.9 percent.

How the market evolves may depend on how both VR and AR developers can meet future challenges around interoperability, IP licensing permissions and design – as most current headsets are too clunky to appeal to the average consumer.

A further factor in accelerating wider adoption will be the deployment of the 5G mobile network, which is designed to connect almost everything – including objects, people and devices – and to host complex 3D spaces such as the metaverse.

“5G’s low latency and high bandwidth can open doors to complex mixed reality applications,” suggests Jijiashvili, “further bridging the gap between physical and digital experiences.”

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