Ever since Facebook changed its name to Meta, defining metaverse as “an embodied internet where you’re in the experience, not just looking at it“, the concept of metaverse has taken off, drawing the attention of a wide variety of high-tech industry players coveting its growth potential.
Jensen Huang, the founder and CEO of Nvidia, fully captured the vast potential of metaverse. “It is a 3D extension of the Internet that’s going to be much much bigger than the 3D physical world that we enjoy today,” said Huang in an interview. For Huang, whose company is on the forefront of AI development, metaverse is a digital twin of our world, and its sheer size in comparison will offer practical application scenarios firmly rooted in reality: for example, an autonomous-driving software can run through millions of driving scenarios in the virtual world of metaverse, reducing the risks of doing so in the physical realm. Moreover, metaverse contains an economy that is simply larger than ours.
While Nvidia’s simulation and collaboration platform Omniverse offers one way to access and build the metaverse, for the general public to experience the fully immersive environment of metaverse as described by Mark Zuckerberg, augmented reality and virtual reality (AR/VR) eyewear seem to offer a readily and easily accessible path. Here, Taiwan’s vibrant electronics contract manufacturers play an enabling role.
Hardware manufacturers are the key enablers
Even before Facebook made metaverse a buzzword, it already helped to propel the AR/VR glasses industry. Last September, Facebook and the eyeglasses brand Ray-Ban introduced their first-generation of smartglasses, Ray-Ban Stories. Apple, meanwhile, has been long rumoured to be developing its smartglasses. The development coincides with Taiwanese contract manufacturing industry’s search for the next growth sector, as smartphone and PC markets begin to saturate.
Quanta Computer Inc., the world’s largest manufacturer of servers and a main supplier of MacBook and Apple Watch, already recognized the growing potential of smart glasses back in 2015, and made a series of moves to anchor itself in the smartglasses industry, including cooperating with STMicroelectronics and Israeli AR glasses startup Lumus. Apart from Quanta, Pegatron Corp. also a main Apple supplier, is another frontrunner of Taiwan’s smartglasses industry. In 2019, Pegatron and WaveOptics, a British diffractive waveguide manufacturer, already collaborated on AR glasses, and it is rumoured to be cooperating with both Google and Apple on their respective smartglasses.
According to the Dutch company Luxexcel, a world leader in 3D printed prescription lenses that sees its main application on smartglasses, convenient and lightweight smartglasses much like our everyday eyewear will be crucial to public receptivity towards metaverse. As Big Tech like Google and Facebook entered the smartglasses race, Luxexcel has already begun to partner with Taiwan’s contract manufacturing industry, readying itself for the pending rise of smartglasses.
Guido Groet, Luxexcel’s Chief Strategy Officer and a former ASML vice-president, observed that metaverse would first be accessible via VR, but AR would be crucial for metaverse to eventually go mainstream. C.C. Leung, Quanta Computer’s Vice-Chairman, echoed the observation, commenting that AR devices, with its real-world application scenarios, would enable more applications than typically chunky VR headsets.
Apple would certainly help with metaverse’s growth, but it had not brought real innovation in the past 10 years, Groet further commented. Instead, companies like Meta and Huawei are setting the pace of innovation today. The Luxexcel executive believed that either American big technology companies or their Chinese counterparts would be the first to bring smart prescription glasses to market, and it eventually determines where Luxexcel would be based.
Metaverse – Made in China?
Ironically, Taiwan’s contract manufacturers have much to catch up, especially when facing severe competition from China. In fact, the world’s largest VR brands like Facebook’s Oculus, Sony and Pico have mostly outsourced manufacturing to Chinese companies, especially to Goertik, which accounts for at least 70% of the VR device contract manufacturing market.
For Taiwan’s electronics contract manufacturers, which make more than 80% of the world’s PC, servers and iPhones, Chinese dominance is a hard pill to swallow. According to a senior executive of a Taiwanese contract manufacturer, the significantly smaller production volume of VR devices compared to those of smartphones and PCs had rendered it hard for Taiwanese manufacturers to reach the economy of scale necessary to compensate their R&D and production costs. While annual global PC and smartphone shipments on average reach 200 million units and 1.4 billion units respectively, the annual shipment of VR devices has been less than 5 million units in the past few years.
The lower price tags of VR devices also added to the challenge. A senior Taiwanese executive remarked that Facebook didn’t need to profit from its VR device sales, as hardware were never its main profit source. Consequently, Facebook was actually losing money on Oculus sales, and it further dented the profit margins of Taiwanese manufacturers, driving them out of the market.
Armed with state subsidies, Chinese companies like Goertik and Longcheer leaped at the opportunity, and gradually took over the market. For example, after Quanta manufactured the first generation of Oculus products, Chinese manufacturers were put in charge of the succeeding generations. “With the small production volume, we simply couldn’t compete against the Chinese who took orders at all costs,” commented the executive.
Pegatron chairman, T. H. Tung, nevertheless remains optimistic towards Taiwan’s future role in metaverse, and maintains that Taiwan is not lagging behind. Quite on the contrary, the Pegatron chairman perceives metaverse to be a realm still undefined, with its practical applications still under exploration. “For metaverse and the associated AR/VR industry to really take off, finding its ‘killer application’ is the key,” observed Tung. Therefore, he regards Taiwan to be among the leading contributors of metaverse’s future.
Without a doubt, if Taiwanese manufacturers could secure the smartglasses orders from Google and Apple, it would add weight to Taiwan’s potential in shaping metaverse.