Original Source: Lei Technology

Image Source: Generated by Wujie AI

At the end of October, former XR enthusiast Mark Zuckerberg stated that AI will become the biggest investment area for Meta next year, and all human resources will also be focused on AI. Earlier, it was rumored that PICO, a subsidiary of ByteDance, had high-level resignations and team downsizing.

Zuckerberg's and Meta's public "betrayal" and PICO's strategic contraction have further worsened the already struggling XR industry. The widespread discussion sparked by the release of Apple's Vision Pro in early June seems to be just a flash in the pan, as AI large models continue to dominate the conversation, leaving little time and space for the fading XR trend.

However, there is always a turning point. While Meta and PICO are losing momentum, new forces are emerging. According to South Korean media ET News, Suh Hong-guk, Vice President and General Manager of XR Business at Qualcomm, recently confirmed that Qualcomm will collaborate with Samsung and LG to develop the next generation of XR head-mounted devices, but detailed information cannot be disclosed at the moment.

For Qualcomm, chips are the key factor determining the performance of XR devices and also their focus. The strong collaboration between Qualcomm, Samsung, and LG will fully leverage their technological advantages to improve XR chip performance.

But can a good chip really solve the various challenges facing the industry?

Semiconductor Winter Not Over, Giants Band Together to Seek a Way Out

Today, these three protagonists are not the first to be involved with the XR industry, and there have been many recent rumors of collaboration.

In May of this year, it was rumored that Samsung would develop the next generation of XR headsets, targeting Apple's competing products. At that time, Qualcomm's name was among the rumored partners. At the Samsung Galaxy UNpacked 2023 event in February, Lu Taiwen, President of Samsung Electronics' Mobile Experience Business, had a close conversation with Qualcomm CEO Amon and Google's Senior Vice President Hiroshi Lockheimer. Sameer Samat, Vice President of Google's Android ecosystem, also hinted at future cooperation opportunities with Samsung.

However, after a few months, Google has focused solely on AI large models, and LG has joined forces with Samsung and Qualcomm to form a strong alliance.

Of course, LG has had significant involvement in the XR industry, focusing on supplying components such as cover glass, OLED displays, and more. This strong entry into the market was not without warning. As early as May of last year, LG executives hinted at "closely monitoring the XR market and rapidly entering if the scale and profitability meet company standards, but waiting for the right timing."

What is truly surprising is that the heat of the XR market has clearly declined this year. Could this be the suitable timing mentioned by LG executives?

On this topic, Qualcomm, Samsung, and LG may feel somewhat helpless.

On one hand, the XR market is not in its best state, but it is not without highlights. The decline in shipments of head-mounted devices is an undeniable fact, with a 33% drop in the first quarter of this year, further expanding to 49% in the second quarter. However, the position of leading brands remains solid, and the industry's winner-takes-all effect is becoming increasingly apparent.

The reasons are clear. After the hype has subsided, primary market financing has frozen, and new projects are struggling to get off the ground. Weaker enterprises and brands are being rapidly eliminated, and resources and users are converging towards the leading players. According to Counterpoint's statistics, the combined market share of the top three brands in the second quarter of this year reached 87%, with Meta alone dominating half of the market. Samsung may also realize that as long as its strength is strong enough to enter the top tier smoothly, it will not worry about business.

On the other hand, the semiconductor winter is far from over, and the terminal consumer market is weak, putting significant pressure on Samsung, Qualcomm, and LG's core businesses.

In the third quarter, Samsung Electronics' profit plummeted by 78% year-on-year, and the loss from its memory chip business decreased from 4.36 trillion Korean won in the previous quarter to 3.75 trillion Korean won, still a staggering figure. Although Samsung expects memory chip prices to rise again in the fourth quarter, especially for high-performance chips required for AI large models, it cannot guarantee when it will return to profitability.

XR may not be a perfect way out, but it is worth a try—after all, XR headsets offer a vast space for imagination. In addition to entertainment demand, the application prospects of XR hardware in education, healthcare, and other industries are also worth attention. Before the release of Apple's Vision Pro, many media outlets were already paying attention to its innovative health monitoring features, similar to what devices like the Apple Watch have done in the past.

Of course, the prerequisite is that the product's performance and quality can withstand scrutiny.

Can a Good Chip Solve All XR Woes?

Indeed, the mainstream XR headsets on the market have received mixed reviews. The perennial issues of content deficiencies, excessive pricing, and more are well-known, and there are also controversies surrounding performance.

The performance controversies of XR headsets are comprehensive, focusing on several aspects: such as battery life, interaction effects, visual effects, and more. Some of these issues can be addressed through lenses and optical means, such as Apple's attempt to use patented "liquid lenses" technology to improve refraction and focus effects. However, the vast majority of controversies are related to chip performance.

From power consumption to resolution, refresh rate, data transfer speed, display latency, and the basic functions, to the image rendering and environmental perception that test the AI computing power, all are determined by the chip. Especially for the currently dominant all-in-one devices, they place higher demands on the CPU's computing power and the GPU's rendering capabilities, while standalone devices can rely on processing units to offload the pressure.

When it comes to chips, Qualcomm is back in its element. As the pioneer of dedicated XR chips, Qualcomm has strong technology and rich product application cases, and its comprehensive strength is beyond doubt.

Qualcomm first entered the XR chip field in 2015, but the initial product design was very simple, just a modification for the Snapdragon 820, optimizing VR headset latency, image rendering correction, and other functions, not even qualifying as a dedicated XR chip. It wasn't until 2018 that Qualcomm released the first dedicated XR chip, the Snapdragon XR1, and the following year, the first product to use this chip was the Nreal Light V2 standalone device.

The initial product, Snapdragon XR1, had already made targeted improvements in resolution, interaction experience, and other aspects, while the Snapdragon XR2 made significant improvements in CPU and GPU performance. It's worth noting that the Snapdragon XR2 was the world's first product to support 5G transmission, with single-eye resolution and battery life both growing several times compared to the previous generation.

After that, Qualcomm and Meta embarked on deep cooperation. In 2022, the two parties signed a cooperation agreement to jointly develop customized chipsets based on the Snapdragon XR platform. The highly anticipated "trump card" product, Quest 3, from Meta, uses Qualcomm's Snapdragon XR2 Gen2 chip—also the most powerful dedicated XR chip Qualcomm has produced to date.

(Image from Meta Quest official website)

Apple's Vision Pro chip performance has also received high praise, especially in terms of interaction and display effects.

Vision Pro is equipped with M2 and R1 chips, manufactured using TSMC's advanced process technology, with resolutions and pixel densities reaching 3648*3144 and 3387ppi, respectively. However, the performance of this product still faces some controversies, such as whether the configuration of two high-performance chips and the slim body will affect heat dissipation, and whether the computing power can support high-precision image generation in the long term.

Qualcomm's response is to continue to roll out performance. According to Suh Hong-guk, both Samsung and LG will develop XR headsets based on Qualcomm's third-generation dedicated XR chip, challenging Apple's Vision Pro and Meta's Quest. The exact timeline is yet to be determined, but Qualcomm's new generation XR chip may be unveiled as early as the first quarter of next year, and it is believed that it has already entered a critical stage of development.

With the support of Qualcomm's new generation dedicated XR chip, the hardware products from Samsung and LG are worth looking forward to. As for Meta and Apple, the two established players, a greater challenge is about to begin.

Apple and Meta Responding Low-Key, AI Computing Power Battle Imminent

Compared to the ambitious Qualcomm, Samsung, and LG, a group of established players seem somewhat indifferent.

The last collective offensive by Meta and Apple was in June of this year. Meta rushed to release Quest 3 before WWDC, but the price of $499 (128GB version) once again made most consumers hesitate. Apple's Vision Pro now seems unlikely to change its fate of peaking at its debut, with recent reports of plans to reduce production capacity and develop a "crippled version" product due to high prices.

Now that Qualcomm is inciting Samsung and LG to vie for dominance, can Meta, Apple, and the deliberately low-key PICO remain calm without feeling any pressure?

Apple's situation is actually quite simple. Apple, Qualcomm, and Meta are purely in a competitive relationship, and they have no substantial interest relationship with Samsung, so they don't need to worry about strategic maneuvering. They just need to focus on product development. However, since Vision Pro was just launched not long ago, Apple's market assessment is still not precise enough, and user feedback has not been collected in time, so there is no rush to formulate the next plan.

In contrast, Meta's situation is somewhat special. As mentioned earlier, since 2022, Qualcomm and Meta have become deep partners, and it's not a bad thing for Qualcomm to develop higher-performance chips for Meta. But both sides also have their own plans and preparations.

Meta does not want to overly rely on Qualcomm. On one hand, they are seeking cooperation with MediaTek and Samsung to customize chips, and on the other hand, they have established an internal chip development department. They have also entrusted some chip foundry orders to Samsung. Qualcomm also hopes to have more manufacturers join in to expand the XR market, even though this may affect Meta's market share. In other words, the interests between Qualcomm, Samsung, and Meta are very complex, and at this stage, no one can do without the other.

However, all parties are very clear about the importance of dedicated XR chips and are betting on the performance improvement of the next generation of products—especially in response to the trend of improving AI computing power.

The Snapdragon XR2 Gen2 has already made significant efforts in AI performance, with GPU performance increasing by over 2 times, while CPU performance has only increased by about 33%. In addition, the application of the NPU neural processing unit has resulted in an over 8-fold increase in computing power. It is worth mentioning that another flagship product from Qualcomm, the Snapdragon 8 Gen3, also focuses on GPU and NPU, supporting the operation of models with over 10 billion parameters.

Meta's senior management has also stated that AI technology can significantly improve the performance of XR headsets, hinting at a focus on self-developed chips. In May of this year, Meta released a series of research and development plans to address the growing demand for AI computing power over the next 10 years, including self-developed AI-optimized data centers, AI model custom chips, and dedicated GPUs. Although these products and technologies will take some time to materialize, Meta's investment and determination are beyond doubt.

Not to mention Apple, which recently announced plans to invest at least $1 billion annually in developing AI technology, with chips undoubtedly playing an important role.

The computing power level of Apple's A-series and M-series chips is already leading in the industry, especially with the M3 chip using TSMC's advanced 3nm process technology. The M2 chip is responsible for computation and interaction, while the R1 chip is responsible for positioning, transmission, and image processing in Vision Pro, which has already shown good results, but stability still needs time to be tested. If the next generation product can use the M3 chip, the performance will definitely be greatly improved.

Suh Hong-guk once told the media that XR headsets are a "mobile computing platform." Now it seems that this statement is becoming a reality. High-performance, high-computing chips may not be able to solve all problems, but they will certainly change the user experience. With better product experiences, consumers are also happy to see various giants continue to focus on computing power—provided that the prices of the next generation products do not become too outrageous.

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