Worldwide spending on augmented reality and virtual reality (AR/VR) is forecast to accelerate out of the pandemic, growing from just over $12.0 billion this year to $72.8 billion in 2024, charting a five-year compound annual growth rate (CAGR) for AR/VR spending of 54.0%.
"2020 has become a major turning point where enterprises and organizations across all verticals are embracing the unarticulated need for augmented, mixed, and virtual reality," said Stacey Soohoo, research manager, Customer Insights & Analysis at IDC.
She explained that although disruptions caused by the pandemic have interrupted businesses' supply chains and forced businesses and consumers to take a cautious approach to spending. Many industries face labour shortages, workplace restrictions due to COVID-19, and a need to improve operational inefficiencies. They are realizing a different set of ingredients are needed to succeed.
Training continues to be a leading use case for augmented/virtual reality adoption, as enterprises continue to focus on knowledge capture and transfer initiatives.
Managing face-to-face interactions and touch points in and out of the physical workplace are just as essential; ranging from virtual property tours to retail showcasing, organizations are adopting AR/VR to create a personalized, immersive customer experience.
“Many enterprises are making necessary investments to address needs that outlive ones brought on by the pandemic, and for many, the adoption of AR/VR is just the tip of the iceberg," said Soohoo.
Commercial use cases
The commercial use cases that are forecast to receive the largest investments in 2024 are training ($4.1 billion), industrial maintenance ($4.1 billion), and retail showcasing ($2.7 billion).
In comparison, the three consumer use cases for AR/VR (VR gaming, VR video/feature viewing, and AR gaming) are expected to see combined spending of $17.6 billion in 2024.
The use cases that will see the fastest spending growth over the forecast period are internal videography and logistics and package delivery management with CAGRs of 101.0% and 100.5% respectively. Seven other use cases are forecast to have five-year CAGRs of 90% or more.
While commercial spending will continue to trail consumer spending for the total AR/VR market, much of the growth in AR/VR spending will be driven by investments from the commercial and public sectors.
The strongest spending growth over the forecast period will come from the banking (126.7% CAGR) and securities and investment services (106.1% CAGR) industries, followed closely by federal/central government (102.5% CAGR).
Consumer spending is expected to see a 34.1% CAGR over the five-year forecast period. Retail will deliver the largest commercial investment at $7.3 billion in 2024, while discrete and process manufacturing will see spending levels of $5.9 billion and $5.1 billion, respectively.
"We've seen a huge uptick in commercial interest in both virtual and augmented reality driven by the pandemic," said Tom Mainelli, group vice president, Devices and Consumer Research at IDC. "Organizations of all sizes are leveraging the technologies to capture and transfer knowledge between experienced and new employees, enhance and streamline field operations, and increase collaboration among frontline workers."
From a technology perspective, host devices and viewers will account for around two thirds of all AR/VR spending by 2024, declining in share as software and services gain momentum. Software will account for almost a quarter of all spending while consulting services and systems integration services will see strong growth with five-year CAGRs of 77.3% and 90.7%.
On a geographic basis, China will see the largest AR/VR spending totals throughout the forecast, although its share of the worldwide total will decline from more than 50% in 2020 to just over 36% in 2024. The United States will be the second largest region for AR/VR spending and will draw close to China by the end of the forecast thanks to a CAGR of 75.1%. Western Europe will also make significant gains with a CAGR of 72.8%.