Demand for augmented and virtual reality expected to soar this year

New IDC study shows big growth for products, services, and use cases.
Written by Bob Violino, Contributor

Video: Businesses still to warm to VR and AR, with just 24,000 headsets bought last year

Demand for augmented reality (AR) and virtual reality (VR) technologies will see explosive growth this year compared with 2017, according to a study released by International Data Corp (IDC).

See also: VR and AR: The Business Reality

The research firm forecasts that worldwide spending on AR and VR products and services will reach $27 billion in 2018, a 92 percent increase year over year. It expects to see spending on these technologies and services achieve a five-year compound annual growth rate (CAGR) of 72 percent over the 2017 to 2022 forecast period.

IDC's latest update to its Worldwide Semiannual Augmented and Virtual Reality Spending Guideprovides forecasts for 20 industries, and reports an increase in AR/VR use cases from 28 to 39 across sectors including consumer goods, media, education, and government.

The consumer industry maintains its position as the biggest source of spending for AR/VR products and services over the course of the forecast period, reaching $53 billion by 2022. That's followed by spending in the retail, discrete manufacturing, and transportation industries, representing $56 billion collectively by 2022.

SEE: Mixed reality in business (ZDNet/TechRepublic special feature) | Download the free PDF version (TechRepublic)

The distribution and services sector is estimated to see a 34 percent CAGR over the forecast period, with spending expected to reach nearly $72 billion by 2022. Manufacturing and resources follows with an estimated 19 percent CAGR, while public sector is forecast to reach $33.5 billion by 2022.

VR gaming continues to be the dominant AR/VR use case in 2018, with spending expected to reach $7 billion. Over the course of the forecast period, retail showcasing represents the use case with the largest growth rate. New use cases for 2018 include public infrastructure maintenance, as well as 360-degree educational video viewing.

The report examines other use cases such as architectural design, augmented reality anatomy, automobile virtual test drives, logistics and package delivery management, real estate virtual property tours, remote surgery, retail store virtual fitting rooms, and VR grid control.

Host devices represent the top technology category for this year, with spending expected to reach $10 billion, followed by VR software at $5.7 billion. With a 142 percent annual growth rate, AR viewers represent the top technology category over the forecast period, followed by AR systems integration, and AR customer application development.

Commercial interest in both AR and VR continues to accelerate as new hardware ships, improved software appears, and more use cases evolve, said Tom Mainelli, vice president of devices and AR/VR at IDC. He noted that a recent IDC survey of US IT decision markers showed a huge percentage of companies testing both technologies, and IDC expects that activity will only grow as major industry players roll out the next generation of AR and VR technologies throughout the rest of this year.

Read also: How Verizon is using AR to up the ante on FiOS technician training

The US will maintain a strong foothold in the market, with the largest CAGR over the forecast period at 99 percent. The Middle East and Asia and Asia Pacific (excluding Japan) will experience similar growth rates over the forecast period, followed closely by Latin America.

In 2018, China will top all regions in spending, at $10.2 billion with top spending in host devices, followed by VR software and AR software.

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