Decoding the Metacosm the Explosion Period of Related Industries Will Come Next Year?

Reporter: Jiang Hankun

Camera: Li Zihan

Yu Yafei, Partner/CIO of Zheling Investment. Engaged in private equity, venture capital and other related work for nearly a decade. The core areas of focus include intelligent hardware, chip devices, industrial software, equipment materials, photoacoustics and electricity, etc., leading and participating in a number of project investment work, the current company is in management of nearly three billion. Past investment management projects include: Youji Industry, Gyllandin, C*Core Internet of Things, Unigroup Lighting, Aidi Palace, etc.

A collection of ideas

Compared with the advanced level of foreign countries, the domestic VR/AR industry still has a big gap in software and hardware

At present, the domestic VR/AR industry investment and financing is hot The foreign VR/AR industry has entered a benign stage of development

Meta Quest2 sales exceeded 10 million Hardware and content matching ecology has initially taken shape

Technology is gradually maturing The concept of the metaverse is expected to gradually land

In the next 3-5 years, small "worlds" under the metaverse may gradually form

At present, it still needs to be improved in the fields of display ecology, rendering, and interaction

Visual interaction has entered the mature stage of products Tactile, taste, and acoustic technologies still need to wait for technological progress

The explosive period of vr/AR industry may come in 2023

Interview summary

There is still a big gap between the domestic VR/AR industry and foreign countries

First Finance: Hello Yu Zong, you once said that these VR/AR companies in China have basically looked at it. How do you feel about the overall state of these related enterprises in China?

Zheling Investment Yu Yafei: In the past three or four years, domestic VR/AR companies, giants and startups are all working in this direction, and the industry has made great progress from technology to products, but we must also see that domestic VR/AR companies and international giants are still more obvious than the gap. For example, from a hardware point of view, we see the Ar glasses of the Microsoft HoloLens (Microsoft Mixed Reality Headset) generation, in fact, its algorithm five or six years ago is still relatively advanced. Then the domestic AR glasses, regardless of algorithm or hardware configuration, still have some gaps with the HoloLens experience four or five years ago.

In the VR field, you can see, for example, the now-sold Meta Quest 2 (Facebook's VR glasses brand), the domestic better like Pico VR, and companies like NOLO, you can still see that we still have some gaps in algorithms, SLAM (synchronous positioning and modeling) and other technologies.

The gap between the soft side or the content is also very large, such as our game engine at the bottom, content production, as well as the entire content creativity, and the improvement of the entire industry chain, there is also a big gap.

At present, the investment and financing of the domestic VR/AR industry is hot

CBN: How do you evaluate the current development status of our VR/AR industry in China, including investment?

Zheling Investment Yu Yafei: These are two issues. The first question, in fact, in the past 2021, the financing of the VR/AR industry chain should be said to be very hot. A more typical case is that in August 2021, Pico, a well-known domestic VR brand company, was acquired by ByteDance, and the overall transaction volume was more than 9 billion, which shows that the entire industry is in a very hot state in the capital market. From upstream to downstream, we can see that whether it is the upstream optical modules/devices, as well as sensing, haptics, algorithms, including smart hardware, in fact, the amount of financing last year has increased significantly. Basically all mainstream investment institutions in hard technology are flocking to this track, which can be seen from the hardware carrier. In the content area, like the current main applications, games, like the code Qiankun, these have been invested by the giants.

So another question, we say the outbreak point of this industry. You can also see that although the amount of VR glasses sold in our country is not particularly large. But in the past internationally, such as The Black Friday of Christmas in 2021 (promotion period), or even the Black Friday of Christmas in 2020, the sales of the second generation of Meta Quest are very good. Overseas, in September 2021, we have a data that can basically see that in the one-year life cycle of meta Quest II release, its sales have exceeded 10 million units, which has formed a relatively healthy and benign ecology. It means that the user base is large enough, the hardware forms a healthy cash flow, developers can also make money, and the content ecology can also make money. So from a global point of view, in fact, the industrial chain has entered a high-speed and healthy stage of development, and it has entered a benign stage of development.

On the other hand, at home, we think it will be a year to a year and a half slower than the overall pace of the world.

Meta Quest2 sold more than 10 million copies

The ecology of hardware and content matching has initially taken shape

CBN: So VR equipment sales reached 10 million units, will such an order of magnitude be the threshold of the industry?

Zheling Investment Yu Yafei: Right. In 2008, the Apple generation was released, and to sell 10 million units, in fact, Apple took two years. Then Meta Quest started from a generation, 2019 to 2021, last year was actually a milestone event. It is indeed a big difficulty for many companies or new industries. Behind this needs a healthy ecology, such as the layout of the content ecology and the ecology of the hardware, which are all things. I can't say I only have hardware and only have content. In fact, after I buy hardware, it is difficult to form a healthy ecology without content. Then it must be the content and hardware that match each other to quickly reach this position. Behind this also depends on the current Meta, formerly known as Facebook, their entire group company for this piece of strong support, as well as subsidies for hardware, as well as the attraction of the developer ecosystem, in order to build a 10 million level of the situation.

CBN: In your opinion, the popularity of the concept of this round of meta-universe is different from the previous one?

Zheling Investment Yu Yafei: The concept of the first metacosm is actually a completely new concept. Of course, at the end of 2020, Ma Huateng once proposed the true Internet, or we call it a virtual world. Then the metacosm is the basis for the whole creation of a three-dimensional world. But the VR/AR industry chain we mentioned earlier, which may be purely from the perspective of hardware, does not mention the concept of creating a new world. Then the new round of everyone also sees, with the maturity of a lot of three-dimensional technology, SLAM space modeling technology matures, we see the possibility of creating a new virtual world, a digital twin world, so this is different from the concept of the past.

Second, in fact, the maturity of our industrial chain, technology and product maturity are not the same. Then a new stage, in fact, we can look forward to the hardware, really from the concept period to the low tide period into the maturity period, the beginning of the rapid growth stage. From the content side, we can see that a lot of brand new game content is migrating here. There are already a lot of giants building one, starting with not being particularly mature, slowly moving into the process of actually creating a new virtual world.

CBN: How long do you think it will take for the metaverse to mature?

Zheling Investment Yu Yafei: First of all, from the perspective of hardware, we have actually entered the mature stage and begun to rapidly increase the amount. However, from a domestic point of view, the concept of metaverse is still relatively early, and the real meaning of the metacosm still needs a certain amount of time. But globally, it is true that the entire giant is moving in this direction.

Let's understand the metaverse from another angle, what is the metacosm? It is actually a huge scene or world based on social rules. Its underlying technology is actually based on the underlying technology of the game, which may also explain why Microsoft recently spent $68.7 billion to acquire Activision Blizzard, in fact, because the underlying technology of all games, and the underlying technology of large AAA games, such as 3D engines, game modeling, physics engines, physical world rendering and digital twins, are relatively common technologies with the metaverse.

But for the metaverse to mature, it must take time. We look at the possibility that in 3-5 years, there may be a single universe gradually emerging, or a universe made by one or several giants, and we can see that we are in that world. As the hardware matures, we enter the three-dimensional world, and the real world may produce some interactive worlds. We see that the hardware is also mature, and the content is also mature, and it may appear at that point in time, that is, slowly forming some small (virtual) worlds. Or from the perspective of market penetration, it is not a particularly large world, but some small worlds have begun to form.

CBN: I see that there are also reports that put forward the gap between our domestic and foreign countries in the field of meta-universe and VR/AR industry. In addition to our current domestic advantages in the field of transmission, there is still a certain gap in the fields of display ecology, rendering, perception interaction and so on, what do you think?

Zheling Investment Yu Yafei: I probably understand this problem, that is, we have our own advantages in China. For example, our communication technology is actually leading the world, but we are rendering technology, in fact, it is the underlying code and informatization, digitalization, and algorithm optimization. In this piece, we must know that the foreign AAA game masterpiece is the result of many years of development, and there is no real AAA game masterpiece in China until now, so you know that from the engine to the game to the content design, the lack is more serious.

Optics, for example, is still in the hands of Japan. At present, many silicon-based OLED (organic and electrical laser display), high-order or Japan's Sony, we also have some companies in our country to do this, but there is still a gap in visual experience, brightness, clarity. We still have room to improve in the deeper underlying technology.

Visual interaction has entered the mature stage of the product

Touch, taste, and hearing technology still needs technological progress

CbN: If the metacosm wants to improve the user experience, in addition to the often said visual and auditory sense, in fact, there are certain requirements in terms of touch. I see that some companies are also making some gloves similar to simulated touch and so on. In your opinion, what is the current state of development in these hardware areas?

Zheling Investment Yu Yafei: From the perspective of three-dimensional vision, the VR industry chain hardware with relatively limited interaction with the virtual world has entered the first stage of product maturity, for example, we said That Pancake (folding optics) technology, such as this three-dimensional vision technology is not too much of a problem, we understand that its product form has entered the first relatively mature stage.

So from the perspective of interaction, such as touch, we see that Meta has released some gloves, including some domestic companies are also doing some tactile technology, of course, some visual, through optical technology to process our interaction with the world. To summarize this problem as a whole, it is actually the concept of human-computer interaction. This piece of interaction technology is still in the first stage of being able to see the virtual world, but it may still take some time for us to interact with the virtual world. So it depends on sensor technology, optical technology, and such as the improvement of algorithms, as well as integrated odor, and of course, some acoustic technologies. For example, the establishment of the sound field, the absorption and propagation of sound. These technologies need to continue to advance before they can gradually reach the node of technology, so that our interaction with the virtual world or the real physical world may become more and more mature.

CBN: Some industry research reports have proposed that the industry outbreak period of the entire VR/AR technology may begin in 2023, do you agree with this point in time?

Zheling Investment Yu Yafei: The whole is recognized. First of all, we need to understand why this point in time, what is a product form? So we look at the first stage, in fact, by 2021, the VR industry chain has actually entered a relatively steady rise stage, and the speed is relatively fast. So what is the next generation of computing platforms? Mobile phones are the computing platform of our current generation, so the next generation of computing platforms means that we can carry them for a long time, 24 hours, and at the same time be able to do some calculations, such as communication calculations, as well as the form of interaction with the world. Then we understand the next generation of computing methods, and the probability is probably an AR (augmented reality) or MR (mixed reality) form. From the perspective of technological maturity, such as the development of technologies such as optical waveguides, Birdbath (an optical structure) (curved mirrors with beam separation functions), etc., they have entered a stage of approaching maturity in the past two years.

Then we look at it from the point of time, Apple may release its own AR or MR glasses at the time point in April 2022, which will make the entire production chain enter a mature stage. We know that the release of Apple products means that this single product will enter a new period of definition, and the entire market may be driven to a better time stage. From this point of view, Apple may form a very strong content ecosystem, which means that we are in 2023 and 2024, in fact, a stage of rapid growth, there are great opportunities.

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