Tech Trends

Augmented and Virtual Reality Leading Growth in Emerging Devices

• By David Nagel
• 10/05/21

Augmented and virtual reality will grow to more than eight times its current size over the next five years, making it the fast-growing category among emerging devices, which include wearables and smart home devices.

According to a new report from tech market research firm IDC, augmented and virtual reality will finish 2021 at a total value of $4.43 billion. In 2025, that value will escalate to $36.11 billion, representing a compound annual growth rate (CAGR) of 68.4%.

"Virtual Reality headsets are seeing strong growth in 2021 from both consumer and commercial buyers," said Tom Mainelli, group vice president for IDC's Augmented and Virtual Reality team, in a prepared statement. "We expect VR growth to continue well into the future as more consumer and enterprise use cases present themselves. Today, AR headsets are primarily focused on enterprise use cases, but we do anticipate consumer-focused headsets will gain traction in the later years of our forecast as major technology companies enter the space with new products."

According to the report: "Augmented and Virtual Reality will see the fastest value growth in the coming years with the anticipation of new devices coming to market from both established and start-up companies and a warming reception among new users. Enterprise users have moved beyond exploratory and pilot use cases and into broader deployments while a growing number of consumers have demonstrated pent-up demand for robust gaming solutions. While the headset itself will be the site of data consumption and attention, keep an eye on how the experience evolves from consuming and interacting with content on the device to connecting with other devices and systems to serve seamless experiences at work and at home."

The wearables market is already much larger than the AR/VR market and will end 2021 at a value of $77.78 billion. By 2025, that will reach $106.35 billion, a CAGR of 9.9%.

"Wearables' value will increase with the continued popularity of earwear and smartwatches. Driving the earwear market higher is a combination of strong end-user demand, a constant replacement cycle, and a long range of devices from emerging and established companies alike. Meanwhile, the smartwatch market will grow as the health and fitness experience evolves to provide prescriptive data as well as descriptive data to uncover new actionable insights," according to the report.

Smart home is by far the largest category in emerging devices, with an expected 2021 value of $289.93 billion, growing at a compound annual rate of 10.1% to $400.36 billion by 2025.