As Apple is expected to debut a headset in January 2023 and Meta slows VR investments, a look at opportunities for the VR supply chain and other headset makers
MediumMing-Chi Kuo
Context & Ripple Effects
This piece lands mid-arc: Apple's first headset had already slipped once, with Bloomberg reporting in early 2021 that the device — then targeted at 2022 around gaming, video, and communication — faced development hurdles and limited AR features. The January 2023 debut window discussed here is the revised expectation, and the analysis frames Apple's entry against a weakening backdrop: Meta pulling back on VR investment just as its chief rival prepares to set the category's reference product.
The framing proved prescient in both directions. Startup funding in the space subsequently collapsed — AR/VR funding fell 74% year over year to $800M across October 2022–March 2023, with the industry explicitly hoping Apple's MR headset would lure VCs back — and by 2024 both giants were trimming: Apple weighing cheaper architectures like offloading compute to an iPhone, and Meta cancelling its premium La Jolla headset that had been built to compete with Vision Pro.
First-order effects
VR supply chain vendors gain a second anchor customer: component and assembly orders tied to Apple's January 2023 launch arrive precisely as Meta's slowed investment cadence frees up supplier capacity.
Other headset makers lose their cost-and-spec headroom — Apple's entry raises the hardware bar while Meta, the volume leader, is simultaneously reducing its own pace of investment.
Second-order effects
Venture capital retreats from the category while investors wait for Apple to validate demand: the subsequent 74% YoY funding drop to $800M shows startups caught between a slowing Meta and an unproven Apple entrant.
Suppliers who retooled for Apple's headset become dependent on a single premium program's volumes, since Meta's pullback removes the counter-cyclical order book that previously smoothed their utilization.
Third-order effects
If the pattern holds, the headset market consolidates around two platform owners' roadmaps rather than a broad vendor ecosystem — visible later in Meta cancelling the La Jolla premium MR headset and Apple exploring lower-cost designs such as iPhone-based compute.
The category's economics shift toward Apple-style premium positioning: with funding scarce and Meta ceding the high end, independent headset makers are squeezed into niches below the flagship tier or out of hardware entirely.
The trend: Consumer headset hardware is consolidating around the investment cycles of Apple and Meta, leaving the supply chain and smaller makers exposed to whichever platform owner sets the roadmap.
@SadlyItsBradley Ming-Chi's entire worldview is Apple, too, so I'd take that with a grain of salt. ByteDance is eating Meta and Snap's ad dollars. The dollars aren't disappearing, they're just shifting. Last time I checked, ByteDance still owns Pico.
I think a lot of industry followers would strongly disagree with the very first paragraph... every facet of the VR industry is currently propped up by Meta's spending. https://twitter.com/... https://twitter.com/...
(1/2) Updates & predictions for higher-end Meta Quest 2 Pro: 1. Reiterating adoption of mini-LED displays & 2P Pancake for marked visual improvements. 2. VR & AR (video see-thru) support. 3. Adoption of about 16 cameras (10 for headset & 6 for two controllers (3 for each)).
Meta's metaverse hardware/headset business slows down. 1. Meta cuts shipment forecasts by 40% for 2022 (from 10-11 mn to 7-8 mn units). 2. Meta holds off on all new headset/AR/MR hardware projects after 2024.
“the headset is the most complicated product Apple has ever designed” NOTE: adding VR to an AR headset is a mistake/distraction https://arstechnica.com/...
@SadlyItsBradley The big issue IMO is the same as 2020: Meta has too much breathing room vs. competitors, and Cambria means they can afford to make product mistakes as Quest 2 continues to be what the most consumers buy. That is the product that would need disruption (re: Pico Ne…
@SadlyItsBradley They got rich fast by operating unsustainably. Moving fast comes at a cost, over time weakening competive advantages, eroding revenue sources, risking future growth and amassing all kinds of issues. They seem to have realized some of it, though, given their new v…
@SadlyItsBradley I see there being multiple players but IMO looks to be converging on duplicity in terms of market share: Meta and ByteDance, but there's still many barriers that need to broken (esp. platform/software) for us to be free of their domination (which I wish would hap…
@SadlyItsBradley It feels like there may be a misunderstanding. I believe we're seeing a core business shift for Meta, not just a recession, away from primarily ads to primarily selling metadata. Correlated, non-personalized data can be a high value asset.
@Tsukinune The issue is this industry has been so tiny, that people who bought in can't see the long term with multiple players in the space Meta is large. But I see their “domination” as a thing of the past. This industry is finally maturing
@SadlyItsBradley If I was to bet on anyone's benefit from reduced orders it's BD/Pico as they have the closest product, but I also have trouble believing Kuo's conclusion that Meta's 11>8M units shipped this year will have such an impact. Even the 8M puts them so far ahead it end…
@SadlyItsBradley I still highly, highly doubt we will see a future mainline Quest device go above ~500 USD. Like The Information said in their roadmap leak, if anything they seem fully prepared to go the Microsoft-Xbox route and just continually write off the hardware segment.
Ming-Chi Kuo calls the upcoming years as the start of the “Post-Meta era” He says: The sustainability of an ADs focused business is dropping which slows the investments they've been making This makes price models like the Quest 2 much harder - it crutches on success of ads biz ht…