A new report from analyst firm IDC forecasts worldwide revenues for the augmented reality and virtual reality (AR/VR) market to reach $13.9 billion in 2017, an increase of 130.5% over the $6.1 billion spent in 2016.
AR/VR spending is expected to accelerate over the next several years, achieving a compound annual growth rate (CAGR) of 198.0% over the 2015-2020 forecast period and totaling $143.3 billion in 2020.
“AR and VR headsets get most of the media attention right now, but the hardware is only as good as the software and services running on it,” said Tom Mainelli, program vice president for devices and AR/VR at IDC.
“On the virtual reality side, producers are quickly moving beyond games to create new content mainstream audiences will embrace. And on the augmented reality side of the fence we’re seeing commercial entities begin to more seriously evaluate the technology and begin to test the waters of app development.”
The consumer market will be the largest AR/VR segment throughout the forecast period with worldwide spending on hardware, software, and services expected to reach $6.2 billion in 2017, an increase of 130.5% over 2016.
Industry spending will trail consumer spending as virtual and augmented reality applications slowly find their way into everyday use. Discrete manufacturing and retail are expected to be the only two industries spending more than $1.0 billion on AR/VR solutions this year.
Driven by a five-year CAGR of 238.7%, retail will move ahead of discrete manufacturing to become the top industry for AR/VR spending in 2020.
Similarly, process manufacturing will move into to the number three position in 2020, overtaking personal and consumer services. Following retail, the industries that will experience the fastest growth over the forecast are transportation (233.7% CAGR) and healthcare providers (231.8% CAGR).
The industry use cases that will attract the largest investments in 2017 are retail showcasing ($461 million), product development ($267 million), and industrial maintenance ($249 million).
By 2020, online retail showcasing will join retail showcasing and produce development as one of the largest use cases with a five-year CAGR of 403%.
On the consumer side, AR games will experience a CAGR of 287.4%, making it one of the fastest growing AR/VR categories over the forecast period.
Spending on VR systems, including viewers, software, consulting services, and systems integration services, are forecast to be greater than AR-related spending in 2017 and 2018, largely due to consumer uptake of games and paid content.
After 2018, AR spending will surge ahead, hitting stride in healthcare delivery, product design, and management-related use cases.
“Early enterprise adopters have often rolled their own tools and applications, while commercial AR & VR enterprise offerings develop. At this stage to make the transition to a robust technology spending environment, third-party custom application development and systems integration will fill a vital role in bringing projects to life,” added Marcus Torchia, research director for customer insights and analysis at IDC.
“We expect initial AR spending to lean on mobile workforce-based use cases, where AR headsets are a natural enhancement to existing mobility investments. And we will see education, research and design applications form a foundation of adoption in professional environments.”