The Zhitong Finance App learned that Huachuang Securities released a research report saying that the XR industry is widely used downstream, and Apple MR products are expected to drive a boom in the industrial chain. At the same time, AIGC can effectively help bottlenecks in content creation, and the industry may be expected to enter a new upward cycle. It is recommended to pay attention to MR hardware suppliers: Lixun Precision (002475.SZ), etc.; MR equipment: JP (688025.SH), etc.; VR industry chain-related targets: Goertek (002241.SZ), etc.; content side suggestions to focus on: Kaiying Network (002517.SZ), etc.

▍ The main views of Huacheng Securities are as follows:

Apple Vision Pro will be officially released on 24Q1. The product has excellent hardware configuration and is expected to become a benchmark product in the industry.

Apple Vision Pro was launched in 2016 and released by WWDC in June 2023. It is expected to officially go on sale in the first quarter of 2024. According to Wellsenn XR's split and cost research data (note: does not represent the company's actual procurement costs), Vision Pro hardware costs as high as 1,733 US dollars, accounting for nearly half of its 3,499 US dollar sales price.

In terms of optical display, Vision Pro is equipped with a 3P Pancake optical solution and a high-end micro OLED to provide the ultimate display visual effect; in terms of human-computer interaction, Vision Pro cancels handle interaction and is equipped with rich sensors for eye movement and gesture tracking interaction; in terms of user experience, to achieve instant transmission and smooth experience, Vision Pro uses a dual-chip architecture to provide massive computing power, while the innovative design is ergonomic, which is expected to accelerate the penetration of XR products through a comfortable wearing experience.

Overall, Vision Pro's basic hardware for XR devices, such as processing chips, screens, and optical lenses, all use the most advanced configurations in the industry, or are expected to become industry benchmark products, driving industry hardware innovation.

XR hardware continues to be iterated but there is still a lack of benchmark products, and the lack of content terminals may be the core factor limiting XR shipments.

After 20 years, stimulated by Oculus Quest 2 (hardware side) and “Half-Life: Alex” (software side), XR ushered in a wave of popularity. Since then, although the XR hardware side continues to innovate, players such as Meta/Pico/Skyworth Digital have released new products one after another, but due to weak innovation on the software side and limited customer base expansion, demand in the XR hardware market has been slowing down since '21. Taking the development history of the smartphone industry as a guide, excellent products and content are the core driving factors of the industry.

With the continuous iteration of hardware, the current XR industry hardware can basically meet the needs of users, but it lacks revolutionary products polished to the extreme like the iPhone 4 to establish a benchmark for consumers.

In terms of content, the excellent content in the early days of XR was focused on the game field, and application scenarios were limited, which limited the development of the industry. As a leader in the consumer electronics industry, Apple plays a benchmark role in software, hardware, and system development. The release of its MR equipment may stimulate developers to innovate on the software side to fill the current content gap and fully drive the needs of the entire XR industry.

There is still room for improvement in the quantity and quality of the content side.

At the quantitative level, XR games are the main ones, which is still insufficient compared to console games: the three mainstream console games total more than 12,000 games, while the total number of VR games on the six platforms is less than 8,000, and mostly light games. In terms of content quality, although XR's excellent content is focused on the gaming field, 3A level blockbusters are rare. Due to the high production costs of 3A blockbusters, few application scenarios, and insufficient shipments of integrated XR equipment, most content vendors lack motivation to produce high-quality products, and the development of the content ecosystem for medium to heavy games is relatively slow.

The success of “Beat Saber”, on the other hand, marked a relative maturity in content exploration for light XR games. In the future, with the catalysis of Apple Vision Pro, game interaction methods may evolve in a variety of ways (from traditional joypad interaction to increased eye tracking/gesture commanding/voice interaction), thereby promoting the diversity of game types (increasing social, card, puzzle, adventure, etc.).

Apple has a complete content ecosystem and may continue to expand XR application scenarios as headphone products are updated and iterated.

Apple MR's operating system, VisionOS, shares core modules with iPadOS and iOS to enable seamless switching with other Apple ecosystem devices. XR movie viewing is currently the second largest XR application scenario in China. Premium IP “film and television” may become a new channel for opening up XR film and television applications. Similar to the development path of XR games, office applications also have competition from leading manufacturers and startups.

If startups can provide better service support in terms of the details of the usage experience, it may have the effect of “making small and big”. Apple has acquired a number of MR content companies in the past 7 years. In the future, it will expand the ecosystem around the four major fields of health, education, audiovisual, and gaming to complement and promote the past application ecosystem.

Risk warning:

Downstream demand falls short of expectations, product introduction falls short of expectations, and industry competition intensifies.