24 Jan 2017
Beijing, January 25, 2017- China's VR industry is expected to expand more than 4-fold in 2017 as more major players enter the industry and new and exciting content drives growth, IDC forecasts.
The VR industry in China experienced a roller-coaster ride in 2016, as strong growth at the beginning of the year sputtered into a disappointing finish at the end of the year. Some media outlets have declared that a winter has arrived for China VR industry. But is this true? Let us review the industry data and let the figures speak for themselves.
IDC data shows that VR shipments in China reached 204,000 units in 2016 Q3, up 367.9% from previous quarter, in stark contrast to the sluggish growth from 2015 Q3 to 2016 Q1, when many consumers took a wait-and-see approach after major international VR brands announced that they were entering the Chinese market. The VR market began to pick up speed in 2016 Q2 and the growth accelerated in 2016 Q3-Q4 thanks to global shipments of Sony PSVRs. Oddly, VR sales were weaker when VR products became a hot topic in the media, while shipments expanded quickly as the media started to express concerns of the market. What caused this discrepancy?
Before 2016 Q2, the majority of VR vendors in China were local companies, and most of these were startups. But then HTC, Samsung, Sony, LeTV and others entered the market, and industry heavyweights Xiaomi, Huawei, Microsoft and Lenovo followed, leaving little room for startups. Some startups were put out of business before shipping a single unit. In the capital markets, VR hardware startups looked too risky, leading to a so-called VR capital winter. But it's worth noting that investors were mainly cautious on investing in VR hardware makers. IDC believes that the capital markets remain optimistic about investing in startups for VR content, leaving the door open for hidden gems such as Rovio and Supercell.
IDC expects China's VR market to expand 441.2% in 2017 as competition intensifies and the market becomes more diverse. The VR market is expected to exhibit the following traits this year:
1.Major players to enter the market
Mobile phone vendors have found a path and motive to encourage their users to upgrade. Inspired by Google, 80% of mainstream mobile phone vendors will start releasing VR products. Meanwhile, traditional tech giants Lenovo, Dell and HP will work with Microsoft to improve their competitiveness in the VR market. Content-oriented Internet companies such as Tencent, LeTV, iQiyi and Baofeng will also test their fortunes in the VR hardware market. VR hardware startups will face greater entry barriers, while players that established an initial footing in the market will need to set a clear direction for development to maintain their positions in the industry.
2.Different VR platforms to command different niche segment
Sony, Microsoft and Vive will become the top three desktop VR platforms in China, while Daydream will lead the mobile VR platforms. Startup content makers and hardware suppliers will have to choose a platform.
3.Screen-less head-mounted displays to see explosive growth
Led by mobile phone vendors, screen-less head-mounted displays will make up 62.9% of all VR shipments in China in 2017. Screen-less head-mounted displays offer consumers a decent VR experience at a relatively low price, helping to boost VR product awareness among consumers.
4.Desktop head-mounted displays to grow more than 4-fold
HTC, Sony and Microsoft will lead the growth in desktop head-mounted displays. Startup desktop head-mounted display vendors in China will strengthen their partnerships with VR experience stores and business applications, or team up with large platforms for further growth. Experience, cost/performance ratio, and platform will be three key factors for the success of desktop head-mounted displays in 2017.
5.Independent head-mounted displays to make inroads
Despite technology and price constraints, independent head-mounted displays are expected to find a path to growth thanks to support from chipmakers and screen producers. After identifying a target audience, independent head-mounted displays should have a chance in overseas markets, as well as the gift and business applications markets.
6.Better content to become available, light industrial applications to emerge
Impressive VR content will emerge in the first half of 2017. Vendors will experiment more in the VR industry and gradually develop light industrial applications for VR, focusing on presentation and entertainment.
7.VR experience stores to expand further
As of 2016Q3, China had over 5,000 VR experience stores. More stores will open and be accessible in lower-tier Chinese cities. A wider range of accessories will become available. Themed movies and games will be offered together to consumers as a package.
2017 will be a year of promising opportunities and great challenges for China VR industry. As more and more interesting VR content becomes available and business models diversify, a number of companies may close or face stagnation. However, the industry does not appear to be in a winter. Rather, it seems that spring is just around the corner for China VR market.
Note: In 2016Q3, cardboard shipments in China reached 1,268,000 units and maintained double-digit QoQ growth. Cardboards are excluded in the current analysis, as IDC does not consider it a VR product. It is undeniable, though, that large shipments of cardboards have played a big role in popularizing VR. However, it is a double-edged sword due to the poor quality of user experience they offer.
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IDC Tracker products provide accurate and timely market size, vendor share, and forecasts for hundreds of technology markets from more than 100 countries around the globe. Using proprietary tools and research processes, IDC's Trackers are updated on a semiannual, quarterly, and monthly basis. Trackers offers timely and critical intelligence to aid our clients in strategic and tactical planning to compete effectively in China.
International Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. With more than 1,100 analysts worldwide, IDC offers global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries. IDC's analysis and insight helps IT professionals, business executives, and the investment community to make fact-based technology decisions and to achieve their key business objectives. Founded in 1964, IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. To learn more about IDC, please visit www.idc.com.cn. Follow IDC China on Twitter at @IDC CHINA
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