A Multibillion Dollar Trend: When Virtual Reality Meets Augmented Reality

With the deployment of 5G-powered smartphones and 5G networks, we are once again hearing about the growth prospects for immersive technologies such as augmented reality and virtual reality. According to data published by Statista, the combined augment and virtual reality markets are expected to reach $18.8 billion this year, up from $10.5 billion in 2019, with no slowdown in sight. Fortune Business Insights forecasts the global augmented reality market will hit $65.2 billion by 2027 while the global virtual reality market will grow to $57.6 billion.

Before we dig into what’s driving those hockey stick forecasts, let’s clarify just what the difference is between augmented reality and virtual reality, and what happens when the two intersect.

Augmented Reality

Augmented reality (AR) adds virtual elements to a user’s real-life environment, enhancing it with other digital details to supplement one’s view. Examples of augmented reality experiences include Snap’s (SNAP) Snapchat lenses and Pokémon Go by Niantic Labs. Pokémon Go uses a mobile device’s GPS to allow users to locate, capture, train, and battle virtual creatures, called Pokémon, which appear as if they are in the player's real-world location. The game was credited with popularizing location-based and AR technology, promoting physical activity, and helping local businesses grow due to increased foot traffic.

Another AR example is one that most mobile Amazon (AMZN) Prime customers are likely to have on their smartphone – the View In Your Room augment reality experience. The feature is tucked inside the Amazon mobile app and lets one preview products in a room virtually to see how they look and fit before purchasing.

Other examples include The detective game Fragments by Asobo Studio uses Microsoft’s (MSFT) head mounted Hololens to scan a room and create crime scenes based on its layout, placing various set pieces around and producing a slightly different experience with each room. Swiss company WayRay develops holographic AR technologies for connected cars and in 2019 demonstrated a holographic augmented reality navigation system in a Hyundai (OO5385:KS) Genesis G80 concept. Investors in WayRay include Hyundai, Alibaba (BABA), and Volkswagen Group’s (VLKAY) Porsche.

Another fun one: Google lets you place dinosaurs in your back yard. Ever wonder what a Tyrannosaurs Rex would look like standing by your BBQ grill? Now you can see it for yourself, through your phone.

Those are just some examples, and Juniper Research sees the total number of AR applications totaling 10 billion by 2024. Promising applications that should drive the AR market according to Fortune Business Insights include one for the retail, education, automotive, manufacturing, construction, and gaming industries.

Virtual Reality

Virtual reality (VR) implies a fully immersive experience that completely replaces users’ reality and places them inside a virtual one. To achieve this, one uses a head-mounted display (HMD) or headset to experience a computer-generated world of imagery and sounds in which you can manipulate objects and move around using haptic controllers. Example of these headsets include Facebook’s (FB) untethered Oculus Rift that uses Oculus Link to connect to computers, and the device utilizes hand tracking for a more intuitive VR experience; Sony’s (SNE) PlayStation VR; the HTC (2498:TT) Vive, the Valve Index and the entry-level Google Cardboard, a cardboard frame in which one can mount his or her smartphone for a somewhat gimmicky but not entirely unrealistic VR experience.

Looking to foster the development of the VR ecosystem, Microsoft brought its Windows 10 Mixed Reality platform to market enabling fully immersive headsets from Acer (2353:TT), Asustek Computer (2357:TT), Dell (DELL), HP (HPQ), Lenovo (992:HK), and Samsung (005930:KS). And like the development of computers, smartphones, tablets and other digital devices, VR devices contain high-end processors from the likes of Intel (INTC), Qualcomm (QCOM), and Nvidia (NVDA) that not only assist in positional tracking but power the immersive virtual experience. As we’ve seen in other applications, most notably gaming, the more powerful the processing power, the richer the experience and the same holds true for VR.

One major use of VR headsets is for gaming, as such devices allow gamers to have a full-immersive experience in the gaming world from first-person shooters to strategy games to role-playing adventures. That market alone is forecasted to reach $2.4 billion in 2024, a hefty increase compared to $0.8 billion in 2019. Other applications include healthcare training, such as surgical simulations, physical therapy, patient education, and clinical assessment; product design from aircraft to automobiles before product prototyping; employee education and other training such as NFL player training to reduce injury risk by focusing on high-risk tackle environments; military training with the U.S. army building a synthetic training environment by 2021 to prepare soldiers for real combat scenarios; virtual travel and other leisure activities. 

AR + VR = Mixed Reality

There are experiences that are amplified by the joining of ideas or technologies, and we’re not just talking chocolate and peanut butter. Mixed Reality (MR) is the use of both VR and AR technologies to create an environment where physical and virtual objects can exist and interact in real-time. MR does not take place exclusively in either the physical or virtual world, but rather in a hybrid one that mixes reality and virtual reality. Unlike augmented reality, users can interact with virtual objects in mixed reality.

One of the more better-known examples of MR is Microsoft's Hololens 2, which is a holographic computer you wear around your head, with lenses over your eyes that project holograms you can manipulate and interact with as though they existed in your physical surroundings. While Apple’s (AAPL) App Store and Google’s (GOOGL) Google Play are among the better known app stores, Microsoft has more than 340 apps for Hololens that run the gamut from education and gaming applications to 3D modeling and mapping applications.

According to Harvard Business Review Analytic Services' Mixed Reality: A New Dimension of Work, MR is becoming a key part of enterprise digital transformation initiatives. Nearly 90% of businesses are exploring, piloting, or deploying mixed reality; and 68% of businesses believe mixed reality is crucial to achieving their organization's strategic goals. Developers are working on many mixed-reality apps that include games as well as educational ones in which teachers can instruct students remotely by using 3D projections and simulations, businesses can help train employees. Already the Microsoft HoloLens was used by Case Western Reserve University to teach anatomy to medical students.

BAE Systems (BAESY) used a mixed-realty system to project a holographic template that helps factory workers visualize all the steps in the process; this initiative improved BAE’s battery-building process by 40%. Japan Airlines (JAPSY) used HoloLens to help train engineers without having to visit a hangar. NASA worked with Microsoft to create the OnSight software that helps scientists and engineers be virtually present on Mars while they are still very much on Earth.

Even though we are in the early days of MR, according to SuperData Research’s Virtual Reality Market and Consumers report, the investment in AR/MR for companies is set to reach $4 billion by the end of 2020.

These technologies are still in “early innings” as the saying goes but are poised to break out in the coming years as a few things continue to unfold:

• Digital Infrastructure continuing to improve. 5G is touting up to 20 gigabits per second (Gbps) bandwidth speeds and 6G (already in development) is promising 1,000 Gbps (!)
• Continual increases in processing power. We have seen processors move from a 32 nanometer (NM) fabrication process in 2009 to 2020’s 5nm chipset with smaller forms expected in the very near future.
• Continued development of the hardware and controllers and finally,
• Our collective ability to develop new and innovative uses for this technology.

The future is not only going to be bright but immersive too.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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