SINOLINK SECURITIES: The eve of the outbreak of AI glasses, Meta Ray-Ban's annual sales are expected to reach 2 million

According to the financial news app Zhitong Finance, SINOLINK SECURITIES released a research report stating that after years of development, smart glasses have always been a niche product with a million-level sales volume; in terms of competitive landscape, with the iteration of new products, the landscape of AR and smart glasses has changed significantly in recent years. The industry performance in Q1 of 2023 and 2024 is impressive, with the team estimating that the shipment volume of Meta Ray-Ban in Q2 of 2024 may reach 500,000 units, with an annual sales volume of 2 million units. Moreover, considering that the current AI functions are only available to users in the United States and Canada, if future regional and language expansions are made globally, the corresponding sales volume may exceed 6 million units. Compared to the first-generation product (300,000 units), the sales volume of Meta Ray-Ban has doubled, showing the initial form of a popular product.

1. What is the sales situation and product pain points of AR glasses & smart glasses?

According to IDC, the global sales volume of AR glasses in 2023 was 480,000 units, and the sales volume of smart glasses was 1.01 million units. After years of development, smart glasses have always been a niche product with a million-level sales volume; in terms of competitive landscape, with the iteration of new products, the landscape of AR and smart glasses has changed significantly in recent years. The pain points of hardware mainly lie in the inability to balance weight, cost, and performance, with the pursuit of ultimate performance resulting in dismal sales of Hololens.

However, the industry performance in Q1 of 2023 and 2024 is impressive, with the global shipment volume of AR glasses in Q1 of 2024 reaching 100,000 units, a 56% increase from the previous year, and the shipment volume of smart glasses reaching 260,000 units, a 217% increase from the previous year.

2. Have there been any popular products in the glasses category?

Reviewing the previous wearable popular products AirPods 2 and XR, as well as the popular product Quest 2, SINOLINK SECURITIES believes that the definition of a popular product lies in the product's ability to meet consumer needs and achieve sales growth several times after its release.

In September 2023, the second-generation product Meta Ray-Ban from Meta and Ray-Ban was launched, weighing less than 50g, with a starting price of $299, addressing the pain points of weight and cost. Compared to the first-generation product, the second-generation product maintains the same design and price, while significantly improving camera quality, sound quality, increasing battery life and charging speed by over 30%, and upgrading chips and storage; at the same time, the product introduced AI functionality in April 2024, currently only supporting English conversations and limited to users in the United States and Canada.

According to IDC, the shipment volume of Meta Ray-Ban in Q4 of 2023 and Q1 of 2024 reached 360,000 and 100,000 units respectively; SINOLINK SECURITIES estimates that the shipment volume of Meta Ray-Ban in Q2 of 2024 may reach 500,000 units, with an annual sales volume of 2 million units. Moreover, considering that the current AI functions are only available to users in the United States and Canada, if future regional and language expansions are made globally, the corresponding sales volume may exceed 6 million units. Compared to the first-generation product (300,000 units), the sales volume of Meta Ray-Ban has doubled, showing the initial form of a popular product 3. What are the functions of Meta Ray-Ban?

In addition to shooting, music, and communication functions, users can activate the built-in AI assistant in the glasses by simply saying "Hey Meta" and stating a prompt or asking a question. Apart from basic daily information such as weather, time, sports matches, and news results, users can also use the "Hey Meta, look And..." command to call the camera for more visual operations.

4. What are the popular smart glasses products to look forward to in the future?

Meta plans to showcase its first smart AR glasses on September 25, 2024. Apple is expected to launch AR glasses after 2026 and is currently working on integrating Apple intelligence into Vision pro. Additionally, many companies are entering the AI glasses race. According to Statista, the global shipment of glasses is expected to reach 1 billion pairs in 2023. Glasses are the most portable wearable device and the device closest to the human eye. With the addition of AI, the industry is expected to achieve sales of tens of millions in the future.

5. What are the Bill of Materials (BOM) costs and pricing speculations for Meta glasses?

According to Wellsenn XR, the comprehensive hardware cost of Ray-Ban Meta is about $164. The breakdown includes SOC (34%), ROM+RAM (7%), OEM (9%), camera (5%), battery (4%), PCB (4%), and acoustics (3%), with the potential for strong sales of smart glasses to drive demand in industries such as assembly plants, chip manufacturers, camera suppliers, battery producers, acoustics companies, and PCB manufacturers.

According to iResearch, optical waveguides account for a high proportion of AR BOM costs, reaching 43%. Considering the historical pricing of Meta's new products and the similarity to BOM costs, the production difficulty and high cost proportion of geometric waveguides pose challenges. SINOLINK SECURITIES believes that the cost reduction curve of geometric waveguide solutions will determine the pricing of Meta AR glasses.

Investment Recommendation: It is recommended to pay attention to XR contract manufacturers such as GoerTek, Luxshare Precision, and Huaqin Technology, as well as optical companies like Crystal-Optech and Sunny Optical Technology.

Risk Warning: Risks include lower-than-expected sales of AI glasses and intensified industry competition