China’s VR market worth $8.5 billion by 2020? Here’s why I doubt it.

Disconnect is a weekly column in which Tech in Asia’s Charlie Custer pokes at holes, plays devil’s advocate, or otherwise attempts to rain on the tech industry’s parade.

The Zuck walks down an aisle at the Mobile World Congress, while attendees check out the Gear VR headsets. Photo credit: Facebook.

Virtual reality is looking like the next hot market in China’s tech industry. According to Bloomberg, the Chinese VR market is going to be worth US$8.5 billion by 2020, and everybody – from giants like Alibaba to established players like Xiaomi to total startups – wants to get in on the action.

There’s no denying that virtual reality is a growth industry. But $8.5 billion is a lot for four years, especially given the industry’s still in its infancy. For comparison, $8.5 billion is more than China’s mobile gaming industry is worth right now, after years of development in a market with over one billion devices.

I don’t think VR in China will grow as quickly as expected. The VR industry’s expansion in China faces a couple of huge stumbling blocks that mobile gaming did not:

My colleague Steven trying out the HTV Vive and not feeling too convinced.

1. Costs

First of all, high-end VR hardware is just too damn expensive right now. To enjoy something like an Oculus Rift or the HTC Vive requires well over US$1,000 when you factor in the cost of the computer needed to power it. Even the Playstation VR will cost quite a bit when the price of the console itself is included in the total (which it will have to be in most cases, since the PS4’s existing install base in China is tiny). And while hardware prices will inevitably come down, I’m not sure how low we can expect them to go in the next four years. By 2020, a current-gen Oculus Rift might be pretty cheap, but it will also likely have been supplanted by newer models, meaning it may not still have much appeal.

Mobile VR right now is little more than a gimmick.

Of course, there are the lower-cost phone-driven headsets, like Google Cardboard, Samsung’s Gear VR, and the plethora of Chinese Gear VR knockoffs. But having tried several of these myself, I find if very difficult to believe that any significant industry is going to be built around them. They are an interesting and novel diversion, but I don’t know anyone who consistently spends time using mobile VR, because it’s just not good enough. The headsets are often too cheap to be comfortable. The phone screens almost always have major screen-dooring issues and the phone motion tracking is rarely latency-free, which means they make most people nauseous after any prolonged use. Interaction with mobile VR is difficult because there’s no controller.

To be frank, I think mobile VR right now is little more than a gimmick, and the vast majority of products on the Chinese market seem to be cheap, half-baked crap. All of these problems will be solved eventually, of course. But I’m not convinced that four years is enough time to do it on the scale Bloomberg projects.

The solution to this may be “rental” models, and I wrote earlier this year that I do think VR will help the arcade and the internet cafe make a comeback. But that infrastructure will take time to build and, at least at first, I expect people will feel strange about going to the internet cafe to use VR to (for example) shop or watch a movie. And on-demand delivery rental of high-end VR gear isn’t happening until processing can be moved into the headsets themselves, given that it’s not going to be cheap or convenient to ship bulky desktop PCs around for short-term rentals.

Image via Lemall.

2. Hardware

Not so fast