MediaTek announced a collaboration with Meta to develop its next-generation smart glasses chip. Since Meta has previously used Qualcomm chips for its two generations of smart glasses products, it is speculated that Meta’s expansion of chip suppliers is aimed at maintaining supply chain flexibility and reducing costs. MediaTek, in turn, is poised to leverage smart glasses to tap into opportunities within Meta’s VR/AR devices.

 TrendForce’s Insights:

1. Meta Expands Chip Collaboration Suppliers, Maintaining Product Development Flexibility and Potential Cost Reduction

In mid-November 2023, MediaTek hosted the overseas summit, Mediatek Executive Summit 2023, where it announced a collaboration with Meta to develop the next-generation smart glasses chip.

Meta’s first smart glasses, a collaborative creation with Ray-Ban in 2021, differ from the Quest series as they are not high-end VR devices but rather feature a simpler design, focusing on additional functionalities like music playback and phone calls.

In the fall of 2023, Meta introduced a successor product with significant improvements in camera resolution, video quality, microphones, and internal storage. This new device is designed to simplify the recording and live streaming process by integrating with Meta’s social platform. Additionally, the new product aligns with the trend of generative AI and incorporates Meta’s AI voice assistant based on Llama2 LLM.

Notably, the market has shown keen interest and discussion regarding MediaTek’s announcement on the collaboration with Meta, given that Meta’s previous two generations of smart glasses used Qualcomm chips, specifically the Qualcomm Snapdragon Wear 4100 for the older version and the AR1 Gen1 for the new version.

Analysis of Meta’s Motivation: Meta’s decision to collaborate with MediaTek may be driven by considerations of risk diversification among suppliers and overall cost reduction.

Firstly, Meta has been investing in the development of in-house chips in recent years to ensure flexibility in product development. Examples include the MTIA chip, disclosed in mid-2023, designed for processing inference-related tasks, and the MSVP, the first in-house ASIC chip for video transcoding, which is expected to be used in VR and AR devices.

Given Meta’s previous attempts, including collaboration with Samsung, to independently develop chips and move towards chip autonomy, the partnership with MediaTek can be seen as a risk mitigation strategy against vendor lock-in.

Secondly, considering that smart glasses, unlike the high-priced Quest series, are currently priced at USD 299 for both models, MediaTek’s competitive pricing may also be a significant factor in Meta’s decision to collaborate with them.

2. MediaTek Eyes VR and AR Device Market Opportunities Through Smart Glasses Collaboration with Meta

From MediaTek’s perspective, their focus extends beyond smart glasses to the vast business opportunities presented by Meta’s VR and AR devices. In reality, examining Meta’s smart glasses alone reveals estimated shipments of around 300,000 pairs for the older model. Even with the new model and the anticipated successor expected to launch in 2025, there is currently no clear indication of significant market momentum.

In practical terms, this collaboration with Meta might not contribute substantially to MediaTek’s revenue. The crucial aspect of MediaTek’s collaboration with Meta lies in strategically positioning itself in Meta’s smart headwear supply chain, challenging the dominance of the original chip supplier, Qualcomm.

Looking at global VR device shipments, Meta is projected to hold over 70% market share in 2023 and 2024. There are also reports of an updated version of the Quest device expected to be available in China in late 2024. If MediaTek can expand its collaboration with Meta further, coupled with the gradual increase in the penetration rate of VR and AR devices, significant business opportunities still lie ahead.

From an overall perspective of the VR and AR industry, the current design of headwear devices no longer resembles the early models that required external computing cores due to considerations of cost, power, and heat.

The prevalent mainstream designs are now standalone devices. Given that these devices not only execute the primary application functions but also handle and consolidate a substantial amount of data from sensors to support functions like object tracking and image recognition, VR and AR devices require high-performance chips or embedded auxiliary SoCs. This market demand and profit potential are compelling enough to attract chip manufacturers, especially in the face of the gradual decline in momentum in the consumer electronics market, such as smartphones.

The VR and AR market still holds development potential, making it a strategic entry point for manufacturers. This insight is evident in MediaTek’s motivation, continuing its market cultivation efforts after developing the first VR chip for Sony PS VR2 in 2022 and collaborating with Meta.

In the global landscape of self-developed chips, the industry has predominantly embraced the Arm architecture for IC design. However, Meta’s decision to employ the RISC-V architecture in its self-developed AI chip has become a topic of widespread discussion. It is said the growing preference for RISC-V is attributed to three key advantages including low power consumption, high openness, and relatively lower development costs, according to reports from UDN News.

Noted that Meta exclusively deploys its in-house AI chip, “MTIA,” within its data centers to expedite AI computation and inference. In this highly tailored setting, this choice ensures not only robust computational capabilities but also the potential for low power consumption, with an anticipated power usage of under 25W per RISC-V core. By strategically combining the RISC-V architecture with GPU accelerators or Arm architecture, Meta aims to achieve an overall reduction in power consumption while boosting computing power simultaneously.

Meta’s confirmation of adopting RISC-V architecture form Andes Technology Corporation, a CPU IP and Platform IP supplier from Taiwan, for AI chip development underscores RISC-V’s capability to support high-speed computational tasks and its suitability for integration into advanced manufacturing processes. This move positions RISC-V architecture to potentially make significant inroads into the AI computing market,  and stands as the third computing architecture opportunity, joining the ranks of x86 and Arm architectures.

Regarding the development potential of different chip architectures in the AI chip market, TrendForce points out that in the current overall AI market, GPUs (such as NVIDIA, AMD, etc.) still dominate, followed by Arm architecture. This includes major data centers, with active investments from NVIDIA, CSPs, and others in the Arm architecture field. RISC, on the other hand, represents another niche market, targeting the open-source AI market or enterprise niche applications.
(Image: Meta)

According to anue’s news, during the recent MediaTek 2023 Summit, major IC design firm MediaTek held an overseas summit in the United States and announced a new collaboration with Meta. MediaTek will take charge of developing the chip for Ray-Ban Meta smart glasses, replacing the competitor Qualcomm’s Snapdragon AR1 Gen 1 chip.

Notably, in October 2023,  Meta launched the new generation of Ray-Ban Meta smart glasses. These feature the Qualcomm Snapdragon AR1 Gen 1 chip, a 12-megapixel camera, and 5 microphones for sending and receiving messages. It is the world’s first smart glasses with Facebook and Instagram live streaming capabilities, enabling the recording of high-quality videos.

MediaTek has long been dedicated to developing low-power, high-performance SoC. This collaboration with Meta focuses on jointly creating a custom chip specifically designed for AR smart glasses, meeting the requirements of lightweight and compact devices. The collaborative product, Ray-Ban Meta smart glasses, is expected to be launched in the future.

(Photo credit: MediaTek)

According to the news from Commercial Times, in a recent press conference, the four major American cloud service providers (CSPs) collectively expressed their intention to expand their investment in AI application services. Simultaneously, they are continuing to enhance their cloud infrastructure. Apple has also initiated its foray into AI development, and both Intel and AMD have emphasized the robust demand for AI servers. These developments are expected to provide a significant boost to the post-market prospects of Taiwan’s AI server supply chain.

Industry insiders have highlighted the ongoing growth of the AI spillover effect, benefiting various sectors ranging from GPU modules, substrates, cooling systems, power supplies, chassis, and rails, to PCB manufacturers.

The American CSP players, including Microsoft, Google, Meta, and Amazon, which recently released their financial reports, have demonstrated growth in their cloud computing and AI-related service segments in their latest quarterly performance reports. Microsoft, Google, and Amazon are particularly competitive in the cloud services arena, and all have expressed optimistic outlooks for future operations.

The direct beneficiaries among Taiwan’s cloud data center suppliers are those in Tier 1, who are poised to reap positive effects on their average selling prices (ASP) and gross margins, driven by the strong demand for AI servers from these CSP giants in the latter half of the year.

Among them, the ODM manufacturers with over six years of collaboration with NVIDIA in multi-GPU architecture AI high-performance computing/cloud computing, including Quanta, Wistron, Wistron, Inventec, Foxconn, and Gigabyte, are expected to see operational benefits further reflected in the latter half of the year. Foxconn and Inventec are the main suppliers of GPU modules and GPU substrates, respectively, and are likely to witness noticeable shipment growth starting in the third quarter.

Furthermore, AI servers not only incorporate multiple GPU modules but also exhibit improvements in aspects such as chassis height, weight, and thermal design power (TDP) compared to standard servers. As a result, cooling solution providers like Asia Vital Components, Auras Technology, and SUNON; power supply companies such as Delta Electronics and Lite-On Technology; chassis manufacturers Chenbro; rail industry players like King Slide, and PCB/CCL manufacturers such as EMC, GCE are also poised to benefit from the increasing demand for AI servers.

(Source: https://ctee.com.tw/news/tech/915830.html)

considering factors such as pricing and the absence of certain essential features, TrendForce anticipates a modest shipment volume of approximately 200,000 units for Apple Vision Pro in 2024. The market’s response will heavily depend on the subsequent introduction of consumer-oriented Apple Vision models and the ability of Apple to offer enticing everyday functionalities that will drive the rapid growth of the AR market as a whole.

VR/AR shipments are expected to drop to 7.45 million in 2023

In the meantime, TrendForce forecasts a global downturn in AR and VR device shipments for 2023, predicting a shipment total of roughly 7.45 million units—an 18.2% YoY decrease. VR devices are expected to shoulder the majority of this decline, with projected shipments hovering around 6.67 million units.

Conversely, shipments of AR devices are expected to remain stable, with projected shipments exceeding 780,000 units. While Apple’s latest offerings could stimulate some demand, the high price tags attached to these units continue to pose a significant barrier to broader market growth.

TrendForce posits that the trajectory of the VR and AR device market may encounter certain limitations between 2023 and 2025. While affordable VR devices could pique the interest of mainstream consumers, the prospect of minimal profitability might dissuade manufacturers from substantial investment in the VR market in the immediate future. A shift towards AR devices and their corresponding applications seems more probable.

Nevertheless, the expansion of the AR device market hinges on a broader acceptance of consumer applications. Therefore, TrendForce anticipates that a significant rise in the VR and AR market, potentially nearing a 40% annual increase in shipments, might not be realized until 2025.