Analysts' view on virtual reality: Opportunity or concept?

In the classic blockbuster "The Matrix", the protagonist Neo can enter the virtual mother body by inserting a catheter into the port behind his head. Neo was able to enter this virtual world with the help of virtual reality (VR) technology. Last week, the virtual reality sector shined in the secondary market. Especially on the 19th, the overall increase of the virtual reality sector exceeded 9%, and nearly 20 concept stocks hit the daily limit. The fierce rise can be seen from the concept stock Galaxy Bio (000806.SZ): on the 19th, it dramatically went from the daily limit to the daily limit, with a single-day amplitude of 19.99%.

The explosion of virtual reality market may be related to a press conference of Baofeng Technology (300431.SZ). On November 18, Baofeng Technology released a virtual reality product "Baofeng Magic Mirror" and held a press conference called "VR Explosion Day". The craze of VR in the secondary market also seemed to be triggered by this.

"2016 will be the first year of virtual reality" - some domestic securities analysts have begun to shout out such a slogan. However, in a market where there is no shortage of hype topics, one of the concerns of investors is that virtual reality will become a mess after the hype.

VR attracts a lot of attention

In the afternoon of November 19, theme sectors heated up sharply, with the virtual reality sector soaring 8%, driving active themes in related smart series and helping TMT and small and medium-sized enterprises to rebound strongly. The broader market followed the upward trend and regained 3,600 points.

Virtual reality is the use of computer technology to simulate a three-dimensional virtual world, allowing users to perceive things in the virtual space in a timely and unlimited manner. Simply put, VR uses vision, hearing, touch, smell, etc. to deceive the human body in all directions, so that users can feel as if they are in the real world. VR equipment is the entrance that connects the virtual world with the real world. Virtual reality has the characteristics of 3I: immersion, interaction, and imagination.

Virtual reality originated in the 1960s. The first applicable virtual reality device used three display screens to create a sense of space, thereby realizing the virtual reality experience. The first VR device, sensorama, was huge in size.

In the 1980s and 1990s, advances in computer and graphics processing technology laid the foundation for the commercialization of virtual reality. With the birth of VR game consoles, a wave of VR commercialization was formed, but due to insufficient computer processing power, this commercialization boom did not last.

From 2013 to date, compared with the 1980s and 1990s, the rapid improvement of existing technologies such as display resolution, graphics card rendering effects and 3D real-time modeling has made VR devices lighter, more convenient and more refined, thereby greatly improving the experience of VR devices.

At present, it can be imagined that the most widely used field of VR is games, such as role-playing, racing or action games, which are all development fields that experiencers look forward to. In theory, under ideal conditions, VR can provide the same experience as the real environment. At the same time, "VR+" is also widely used in various industries, such as "+social", "+e-commerce", "+education", "+medical care" and so on.

Analysts call for "the first year of VR"

A reporter from China Business News noticed that some securities analysts began to shout slogans like "2016 will be the first year of virtual reality."

Baofeng Magic Mirror is considered to be the representative of domestic VR products, and analysts have also focused their attention on the dynamics of the world's top products.

First, Facebook acquired Oculus in 2014, and Japan's Sony, plus HTC, are reportedly going to launch mass-market versions of VR helmets early next year. Some research institutions say that by 2020, sales of head-mounted VR devices are expected to exceed 30 million units, and the size of the hardware market will exceed US$4 billion.

Data from Digi-Capital also shows that by 2020, the market size of the narrow virtual reality industry is expected to reach US$30 billion, and the size of augmented reality (AR) is expected to reach US$120 billion. Based on this calculation, the overall market size of the virtual reality market may reach one trillion dollars.

"The VR market has huge potential in the future and will be the next trillion-dollar market like the mobile Internet. VR can not only meet the needs of the entertainment consumption field, but the explosive demand brought by its social attributes will make virtual reality a basic technology for the next generation of scientific and technological innovation. It will bring essential changes to industries such as online education, online medical care, and training. The era of VR's broad application has arrived." Huachuang Securities' computer analysis team was full of praise for virtual reality.

IT consulting firm Garnet's technology maturity curve shows that virtual reality has passed the stage of concept hype and is about to usher in large-scale commercial applications. Based on this, Huachuang Securities also believes that the maturity of VR technology has reached the critical point of market explosion and consumer-grade products will be born. "We believe that 2016 will be a milestone year for the VR industry."

"It is recommended to pay long-term attention to the field of virtual reality. This industry involves many industries and has broad development prospects. Ecological enterprises that integrate software and hardware will emerge." Bohai Securities said.

Another concept hype?

However, ideals are full, while reality is skinny.

Digi-Capital's report shows that AR/VR devices will begin to shift from early laboratories, small-scale use or 2B business to the mass consumer market around 2016. To achieve this transformation, AR/VR devices should meet seven technical benchmarks, including high performance, strong battery life, high-quality visual effects, immersion, practicality, flexibility, wearability and being cheap enough.

"At present, poor product experience and high mass production costs are the two biggest pain points of VR products." An analyst pointed out that commercial VR products are still in the early stages, and the contradiction between hardware costs and user experience is more prominent. Considering some VR products that have already been on the market, the prices of well-known foreign products such as Samsung GEAR and Oculus Rift are often higher, and although the prices of similar domestic products are lower, the quality of equipment hardware and software is poor, and defects such as lag or overheating that seriously affect the user experience are prominent.

In the secondary market, some market participants pointed out mercilessly that this was just another concept hype.

"A-shares have started to speculate on the concept of 'virtual reality'. These stocks have been called the following names before: Apple concept, smart wearable, holographic concept. They have been speculated so many times and are still continuing to speculate. They are still deceiving themselves." Hong Hao, managing director and chief strategist of Bocom International, pointed out.

However, some people believe that the VR concept of A-shares is just a legend, not even a story?

"The same batch of stocks were once called the Apple concept, then sapphire, then smart wearables, then the holographic concept, and in recent days the entire virtual reality concept. The reality that virtual reality cannot make a profit requires constant hype." A secondary market investor commented.

“There is a lack of reasonably priced consumer products, excellent content services, and a good ecosystem. These three factors were both the reason for the sluggish development of VR many years ago and the guarantee for VR to rise again today. However, except for the first point, it seems that there has not been much improvement in the latter two points.” A Zhihu user who signed his name as a virtual reality practitioner answered the question of why virtual reality has not taken off in the past 20 years.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.