XREAL AR glasses are hitting the overseas market again, how long can the "pocket giant screen" last?

According to data from market research firm IDC, in the past three years, the shipments of VR/AR products were approximately 5.8 million units, 11.2 million units, and 8.8 million units respectively, less than one percent of mobile phone shipments.

The overall market is declining, and XREAL is growing against the trend. It is reported that XREAL's full-year shipments in 2022 will reach 98,000 units, a year-on-year increase of 717%, with a global market share of 37% and a 57% share of the consumer AR market. In addition, the global sales of XREAL Air, the previous generation flagship of XREAL, have exceeded 200,000 units since its release.

The meta Quest 3, which previously emphasized augmented reality (AR), has just been released, and the Apple Vision Pro, known as the "space computer", is about to arrive. How long can the "pocket giant screen" story of XREAL AR glasses be told? The future choice before AR glasses manufacturers is: use it as a computer or as an extension screen.

XREAL was formerly known as NREAL. It was founded by Xu Chi in January 2017 and was renamed XREAL in May 2023. The original intention of founding XREAL was to create a "pocket giant screen that can be used anytime and anywhere" and provide the public with consumer-grade AR products that can truly be used for daily entertainment and work.

The biggest difference from the slightly bulky AR/VR headsets of Apple and Meta is that AR glasses are lightweight, like sunglasses, natural to wear, and portable to store. It is reported that the XREAL Air 2 and XREAL Air 2 Pro glasses weigh only 72 grams, which is equivalent to the weight of two pairs of myopia glasses. The biggest benefit of this is to improve wearing comfort and reduce the presence of the device.

Secondly, consumer-grade AR glasses are known as the "last screen" in the information age. Traditional screens are no longer the only terminal for receiving content. As long as you wear AR glasses, you can browse content on your mobile phone, tablet, or computer as you like, whether in your bedroom or on the subway. The application scenarios of XREAL are mainly for movie viewing, followed by office work. The former is a "mobile theater" and the latter is an "invisible computer".

XREAL is lightweight and portable, but it also sacrifices the interactive freedom of AR glasses to a certain extent. Today, as six-degree-of-freedom interaction technology gradually moves toward mainstream XR hardware, XREAL’s AR glasses still maintain three-degree-of-freedom interaction.

Six degrees of freedom, also known as 6DoF, simply put, three degrees of freedom products can only sense the rotation of your head, and you cannot use natural body movements to change the perspective or interact with the outside world; and six degrees of freedom spatial positioning means that you can move freely in the virtual reality world without restraint, such as avoiding oncoming objects in the screen, standing up, squatting, moving forward and backward, observing objects from any angle, and even walking in the virtual reality space.

The "space" limitation greatly compresses the application scenarios of XREAL Air 2. Like most current consumer AR products, XREAL Air 2 needs to be connected to a host (mobile phone, computer, etc.). Its main function is to extend the screen. It cannot turn the device itself into an electronic terminal for life or work like the Apple Vision Pro display.

For example, Apple Vision Pro displays gesture control functions, allowing users to operate the system functions of the head-mounted display without the need for external devices such as handles, keyboards, and mice;

Without a mobile phone and computer, the functions of XREAL Air 2 glasses are limited. Fortunately, mobile phones are still portable terminals that people cannot live without, and XREAL Air 2 has a high degree of compatibility with mobile phones. The glasses also have a built-in Snapdragon XR2 chip, large-capacity storage space, and increased battery capacity. Judging from these performance configurations, it is intended to develop in a direction that is independent of mobile phones/computers and can be used independently.

It can be seen that XREAL Air 2 has made compromises in order to solve the contradiction between function and size, focusing on light application scenarios and sacrificing more complex usage requirements. Although the performance has been improved, it is still limited to an application scenario of "expanding the screen".

People can’t help but wonder, what is the overseas sales of this domestic AR product with limited functional scenarios?

In fact, XREAL has set its sights on overseas markets where XR market education is more mature from the beginning, and has launched business in Japan, the United States, and South Korea.

XREAL first chose South Korea to test the waters, and cooperated with LGU+, one of South Korea's three major operators, to launch the Nreal Light series of products, which were also sold in conjunction with 5G mobile phones such as Samsung Note20 and LG Velvet. After this strategy was successful in South Korea, XREAL joined forces with operators in the United States, Japan, Switzerland, Germany and other countries to enter the local market, and occupied the market high ground in the United States and Japan, ranking first on many lists such as Amazon.

In the context of the overall decline in VR/AR product shipments in the past three years, XREAL's full-year shipments in 2022 reached 98,000 units, a year-on-year increase of 717%, with a global market share of 37% and a share of 57% in the consumer AR market. In addition, global sales of XREAL's previous generation flagship XREAL Air have exceeded 200,000 units since its release. According to Semrush data, XREAL’s current main users are still concentrated in overseas markets such as the United States and Japan.

Before Apple’s Vision Pro, XREAL Air 2 was released first. In addition to the advantage of time to market, it also has a price advantage. How long can such an advantage last in the market?

Data released by Debon Research Institute shows that one of the main reasons why users choose AR glasses is entertainment use, accounting for 43.4%. Video and game players are the main consumer groups of AR, and their purchasing motivation is mainly to obtain more diverse and interesting entertainment experiences. Work and study use is also a major reason why users choose AR glasses, accounting for 29.2%.

From the perspective of usage scenarios, the current mainstream devices on the market can realize games, videos, and office scenarios. However, from a price perspective, the meta Quest 3, which emphasizes augmented reality and can be used independently, is priced at US$499, and the XREAL Air 2 is priced at US$399. On the premise that the latter's functions and scenarios are far different from the former's, the price is not much cheaper.

iResearch data shows that in the domestic consumer AR glasses market, Thunderbird Innovation, XREAL, Rokid, Huawei and INMO are the top five sales. XREAL, which focuses on overseas markets, still captured 22.9% of the market share, ranking second. Compared with competing products in these markets, XREAL does not have much price advantage.

At the same time, since 2023, the market competition for consumer AR glasses has also intensified, with more major hardware manufacturers appearing among the competitors. Xiaomi has released the exploration version of wireless AR glasses, OPPO has displayed a new generation of smart glasses OPPO Air Glass 2, ZTE Nubia has launched AR smart glasses Neovision Glass, Lenovo has a new generation of lightweight AR glasses Morningstar G2 light, etc. On the AR glasses track, there are indeed many new products or conceptual devices on the road.

Mobile phone/PC manufacturers produce AR glasses, most likely to adapt to their own products. As AR glasses become more and more abundant, the story of "pocket giant screen" is no longer enough. In the future, the high ground that XREAL will really compete for is: a glasses-type computer that is independent of mobile phones/PCs. For that highland, the strongest rival Apple Vision Pro is charging.