The Economist April 9th 2022 55
BusinessHeadsetwars
Seeing and believing
W
ith eyeslike saucers, nine-year-old
Ralph Miles slowly removes his
Quest 2 headset. “It was like being in an-
other galaxy!” he exclaims. He has just
spent ten minutes blasting alien robots
with deafening laser cannons—all the
while seated silently in the home-electron-
ics section of a London department store.
Sales assistants bustle around, advertising
the gear to take home today. “That would
be sick!” enthuses Ralph. “Don’t get him
started,” warns his dad.
Children are no longer the only ones ex-
cited about “extended reality”, a category
which includes both fully immersive vir-
tual reality (vr) and augmented reality
(ar), in which computer imagery is super-
imposed onto users’ view of the world
around them. Nearly every big technology
firm is rushing to develop a vr or ar head-
set, convinced that what has long been a
niche market may be on the brink of be-
coming something much larger.
Meta, Facebook’s parent company, has
sold 10m or so Quest 2 devices in the past 18
months; Cambria, its more advanced head-
set, is coming this year. Microsoft is pitch-
ing its pricier HoloLens 2 to businesses.
Apple is expected to unveil its first headset
by early 2023 and is said to have a next-gen-
eration model in the pipeline. Google is
working on a set of goggles known as Iris.
And a host of second-tier tech firms, from
ByteDance to Sony and Snap, are selling or
developing eyewear of their own.
The tech giants spy two potentially vast
markets. One is the kit itself. Only around
16m headsets will be shipped this year,
forecasts idc, a data firm (see chart on next
page). But within a decade sales may rivalthose of smartphones in mature markets,
believes Jitesh Ubrani of idc. “Some people
ask, ‘Do you think this is going to be as big
as what smartphones created?’” says Hugo
Swart of Qualcomm, which makes chips
for both headsets and phones. “I think it’s
going to be bigger.”
That points to the second, still more
tantalising opportunity: control of the
next big platform. Apple and Google have
established themselves as landlords of the
smartphone world, taxing every purchase
on their app stores and setting rules on
things like advertising, at the expense of
digital tenants such as Facebook. Whoever
corners the headset market stands to ac-
quire a similarly powerful gatekeeping po-
sition. “It is going to be the next big wave of
technology,” says Mr Ubrani, “and they all
want to make sure they get a piece of that.”
The search for the next platform comes
as the last one shows signs of maturing.
Smartphone shipments in America fell
from a peak of 176m units in 2017 to 153m in
2021, according to idc. The advertising
model that has powered firms like Face-
book and Google is under attack from pri-
vacy advocates. In response, Mark Zucker-
berg, Meta’s boss, has bet the future of his
company on the “metaverse”. Microsoft’s
ceo, Satya Nadella, has said that extended
reality will be one of three technologies
that shapes the future (along with artificial
intelligence and quantum computing).
Sundar Pichai, his counterpart at Alphabet,
Google’s corporate parent, said last yearTech firms are betting that “extended reality” glasses could be the next big
product—and perhaps the next big platform
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