Meta falls behind, “Fruit Chain” falls, is the Metaverse honey or poison?

The Metaverse’s “wake-up time” came a little suddenly.

On June 22, Tianfeng International Securities analyst Ming-Chi Kuo said on Twitter that Meta’s Metaverse hardware headset business has slowed down, and its shipment forecast has been lowered by 40%, while all new headsets/AR after 2024 have been postponed. /MR Hardware Project.

Meta falls behind, "Fruit Chain" falls, is the Metaverse honey or poison?

Source: Ming-Chi Kuo’s Twitter

The stock price of Meta was stable that day, unaffected by the remarks, only slightly down 0.76%, but the chain effect transmitted to the consumer electronics industry chain caused the market to mourn .

Although Ming-Chi Kuo adjusted his downward revision forecast for shipments to 25%-35% later that day, Goertek also refuted rumors that the company’s operations and cooperation were normal, but the company’s stock price continued to fall by 4.4% on the 23rd.

When a round of technology cycle comes to an end, the explosive nodes brought by leading manufacturers such as Meta and Apple are still full of unknowns. Before the dividend of the new cycle arrives, scenarios such as “Oculus production cuts, Goertek falls” will only continue to be staged.

01 What happened to Oculus

After the first VR boom between 2016 and 2018 faded, the Oculus Quest 2, released in September 2020, almost single-handedly changed the market for underserved VR hardware.

Quest 2 is priced at $299, and its original intention was to grab market share with a high cost-effectiveness among products with the same configuration. Fueled by the epidemic, the sales of Quest 2 at the end of last year successfully exceeded Zuckerberg’s “singularity” – 10 million units. That number is 5 times that of the previous generation Quest.

In the following year, Meta was full of firepower in terms of distribution speed and intensity, and Oculus’ market share accounted for 80% of the overall VR market.

However, the good times did not last long. Steam data shows that since the beginning of this year, the proportion of Oculus Quest 2 users jumped from 39% to 46% in January this year, and only increased by 2% in May this year, and the number of users in April and May Flat, with little growth.

Meta falls behind, "Fruit Chain" falls, is the Metaverse honey or poison?

Source: Steam platform

At the same time, the repeated difficulties of new products made Meta’s VR hardware green and yellow. Among the four major VR headset series announced by Meta, Cambria was originally planned to be launched at the end of last year, but due to the impact of supply chain capacity and R&D progress, it is expected to be postponed to September this year, and whether new products can be released as scheduled in September this year has now become a problem. Unknown.

According to The Information, since 2022, Meta has not only abandoned building a new VR operating system framework, but its self-developed processor is not as good as the Qualcomm XR 2 processor. This means that it is difficult for Meta to open a big gap with domestic and foreign VR headset manufacturers such as Pico, HTC, Lynx, etc. on the basis of VR equipment hardware.

From the perspective of Meta’s investment, the stagnant state of the VR business will continue for some time. In May, a Meta spokesperson said the company plans to cut spending at Reality Labs, including slowing hiring and suspending or delaying some projects.

Reality Labs is the core department that carries the Metaverse business. According to the financial report data, from 2019 to 2021, the operating losses of the Reality Labs business were 4.503 billion US dollars, 6.623 billion US dollars, and 10.193 billion US dollars, respectively, and a loss of more than 20 billion US dollars in three years, and Losses continue to widen.

In just two years, the “Metaverse” outlet has rapidly expanded, attracting a large number of followers and being quickly falsified.

Steam data shows that as of May this year, the penetration rate of VR headsets on the Steam platform was only 3.24%. That is to say,even from a global perspective, the scale of the VR hardware market is still in its infancy, and manufacturers can only make a fuss about a cake that is not big enough.

“VR will still be dominated by games for a long time, and social networking is also game-oriented, and it is unlikely to break the circle.” The aforementioned entrepreneur also pointed out, “(It may take at least another five years), AR may be more It is faster, but it is still based on traditional terminals, and products in the form of glasses cannot be popularized in the C-end in a short period of time.”

The “Metaverse” is not necessarily Zuckerberg’s dream, but it must be seen as a rare opportunity for Facebook to break the ceiling.

In testing the waters, such bets are bound to come with risks. “Meta’s previous expectations for VR should exceed the scope of games, such as collaboration, education, shopping, etc.” A former VR hardware entrepreneur told 36Kr that Meta is very likely to have poor expectations during the implementation of subsequent products.

“At present, there is a lack of high-quality content, coupled with the general integrated experience of software and hardware, I see too many product problems now, and the (VR hardware) market volume will not be larger than that of the switch.” The person added.

02 Success is also Xiao He, failure is also Xiao He

Looking back at Zuckerberg’s entry into the Metaverse, compared to the grand Metaverse blueprint and ambition, Oculus is more like Zuckerberg’s only bet to save the company’s decline.

“At that time, Xiao Zha felt that the acquisition of Oculus had been so long, and it was time to let it contribute, and he felt that in the current ecological environment, in order to survive, it was necessary to become the upstream, and Facebook was the most downstream, and it was easy to be killed by Apple, so he decided to To be upstream in the Metaverse,” a former Facebook employee told 36氪.

Zuckerberg has said that the Metaverse business will not pay off for ten years, and during this period , the income of the application family will be transfused to Reality Labs. But unfortunately, Meta’s “money printing machine” has also all but stalled in recent quarters.

The financial report for the first quarter of this year shows that Meta’s net profit fell again after the fourth quarter of last year, recording US$7.465 billion, a year-on-year decrease of 21%. Apart from the loss of investing in the Metaverse, the recession of old cash cows is also one of the reasons.

According to the data, the net income of the Meta application family in the first quarter was US$11.5 billion, a year-on-year decrease of 12.8% and a month-on-month decrease of 27.7%. In the fourth quarter of last year, Facebook’s MAU was 2.91 billion, the first quarter-to-quarter decline. After this point, social business growth is becoming more and more difficult. That largely prompted Zuckerberg’s decision to shrink Reality Labs.

Taking VR hardware as the boundary, there are Internet giants like Meta on one side, and “goers” who “work” for big factories on the other.

Deeply binding with leading customers, falling in love and killing each other, has always been the norm for domestic electronic foundries.Profits and losses come from the same source, and the slightest disturbance from the top customer can often cause a collective flash collapse of the foundry.

Similar to Meta’s scruples about Apple, there is another voice that makes Goertek anxious: practitioners are waiting for Apple’s hardware.

An AR manufacturer investment and financing person said that in addition to Apple’s brand effect can help VR popularize, many people believe that Apple’s product technology path will be the mainstream technology path.

“The AR glasses are still in a state of contention, and the product shape and technical solutions have not been fully determined. Maybe the three brands will use three different optical display solutions, and the technology of VR devices is also slowly iterating. Once Apple chooses certain technical paths, It will be a major positive for companies involved in this technology line,” the person said.

At the end of last year, it was also a prediction made by Ming-Chi Kuo: Apple has just started planning the second-generation AR/MR headset, which is expected to be shipped in the second half of 2024, and their initial exclusive NPI (new product introduction) supplier is “fruit”. Chain” leading Luxshare Precision. “One Word Ten Billions” was staged again, and Luxshare Precision rose 6.19% that day, although as of the 2021 interim report, Luxshare Precision’s VR/VR products have not yet contributed to revenue.

The same rising logic can also be applied to Goertek. In 2020, after Goertek won the exclusive OEM for the Oculus headset, Goertek’s stock price rose by half again within a year, and at the same time helped Goertek transition to VR hardware when smartphones peaked.

Past financial reports show that VR hardware is classified by Goertek into the category of “smart hardware”, and the revenue brought by the smart hardware sector to Goertek has increased from 6.627 billion yuan in 2018 to 32.809 billion yuan in 2021, surpassing it for the first time last year. Including the “intelligent acoustic complete machine” business of Airpods.

In terms of revenue ratio, smart hardware increased to 50% in the first quarter of this year, becoming Goertek’s largest revenue pillar, which naturally played a decisive role in Goertek’s valuation logic in the secondary market.

Although the overall development of the VR industry is at an early stage, the sensitivity of transmission to the industry chain is very high. Essence Securities pointed out that the proportion of domestic B-end shipments is significantly higher than that of C-end. Last year, B-end hardware headsets accounted for more than 70%, and the share of C-end shipments was further reduced.

This also means that once the market’s digestion capacity is insufficient, the order cutting event will no longer be an isolated case, but some investors are more optimistic about this.

There is a view that from the Steam data in May, the monthly active ratio of VR headsets hit a new high, and the growth rate was the fastest in a single month, but the growth rate of Oculus alone slowed down. If Ming-Chi Kuo’s prediction is true, it may be the brand sales caused by competition. Structural adjustment, but Goertek almost monopolizes major brands such as Oculus, Sony, and Pico, and the impact will not be too great.

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