Virtual Reality and Augmented Reality (VR/AR) were recently introduced as a toy for hard-core gamers. According to Kota Ezawa and a team of analysts at Citi, the VR/AR market is ready to "forge an intimate presence" in non-gamers' everyday lives.
Ezawa continued that the market for hardware, networks, software/content and services will reach $200 billion by 2020 and become a $674 billion five years. By comparison, the global smartphone market is a $400 billion annual industry.
The analyst suggested that AR technologies will eventually penetrate the e-commerce and mobile commerce markets. In fact, the technology's potential within commerce is "far greater" than entertainment.
"Importantly, we expect AR technologies to replace the smartphone handset in the long term," Ezawa wrote. "It is no exaggeration to say that AR technologies will allow the evolution from smartphones to wearable devices. We therefore believe the AR market will ultimately be larger than the VR market."
Sony Is A 'Prime Candidate To Spearhead Growth'
Ezawa's top pick for the space is Sony, as the launch of its PlayStation VR (previously known as Project Morpheus) is expected by June 2016. According to the analyst, Sony is a "prime candidate to spearhead VR industry growth" and it has a "competitive edge" to battle against any other global player, including Facebook Inc FB and its Oculus Rift.
Ezawa pointed out that Sony has a "substantial" track record in electronic components and semiconductor technologies that can "help hone the competitive edge" of its VR business. The company also boasts a "rich technical foundation" in mechatronic devices (i.e., sensors) due to its marketing of robot products in the early 2000s.
Bottom line, Sony's already existing portfolio of content including games, movies and music will "allow the company to build a platform business" and better compete against industry titans like Alphabet Inc GOOG GOOGL.
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