The metaverse is still around, despite the tech refocus on AI, and VR headsets are the gateway to this world of make-believe, but until the metaverse is something substantial enough to attract even a modest portion of consumers, the VR space will have to rely on gaming to generate headset sales, with headset brands hoping that a more robust macro environment will help to boost sales this year, after a dismal 2022.  According to published numbers, which vary considerable from source to source, VR headset shipments declined ~20% last year, for the first time, after years of large gains, albeit on smaller bases in the early years.
There are many factors that come into play when it comes to VR headset sales, however there is one facto, aside from price, that might be considered the ‘elephant in the room’, and that is weight.  VR headsets are complex devices, containing considerable optical and electronic components, along with batteries (in some cases), cameras, displays, and fans, all of which add up to what can be a ridiculously odd looking and weighty headset that can become quite fatiguing.  As each headset brand is looking to provide its own combination of features and visual quality, much effort is placed on squeezing in as much necessary equipment as possible into the average headset, and while all brands try to keep headset weight in mind, headset developers are usually big fans of VR in general and are likely willing to accept a heavy and bulky headset than the average consumer.
Our VR database shows that the average weight of a VR headset is trending down, albeit slowly, with the average for headsets either released this year or expected to be released, is ~382 grams, or the equivalent of a loaf of bread with a few slices missing, so imagine playing a game with an almost full loaf of bread on one’s head, and it becomes easier to understand why VR headset weight is a significant factor for VR users.  [Note that the Hi/Lo range scale is on the left side of the chart, with this year’s heaviest headset weighing in at 625 oz, or the weight of a healthy squirrel.]
While all brands are interested in reducing the weight of their VR headsets, it is a tradeoff against technology and features, with many looking toward those characteristics over headset weight, but there are those that are working toward making VR headsets more than (less than?) the bulky devices they are today.  One company in particular has taken the weight challenge to heart and will be releasing its first VR headset this year that will clock in at a mere 127 grams, 1/3 of the average 2023 VR headset weight, and only 20% of the weight of this year’s heaviest headset.  While the company Bigscreen (pvt) has been around since 2014 and has released only a beta headset in 2016, the new ‘Beyond’ headset, which ships in 3Q, is designed to be the lightest and smallest VR headset available, and while it will certainly play games it comes with an interface box that allows the user to rent 3D movies (200+ available through the company), browse TV channels, watch live events, or do more conventional game playing (Twitch shared) and work oriented collaboration using Bigscreen software, which can be used on other VR headsets and is free.
The Bigscreen VR headset is not cheap, with a starting price of $1,000 (pre-order) and $100 for the audio strap, but when compared to other headsets, regardless of price, the ‘Beyond’ headset looks, by far, the most comfortable to wear for an extended period.  The only issue that might become a problem is that the company decided not to make the headset IPD adjustable.  IPD, or Inter-pupillary distance, is the distance between a user’s pupils, which is obviously different for each person.  Many Vr headsets build in mechanics that can change the IPD to match the user, a particularly necessary detail, as an incorrect setting can cause blurry images and rapid eyestrain.  Bigscreen did not want the heavy and bulky IPD adjustment hardware in the headset, so they will custom set the IPD for each user on order.  This solves the problem but will slow production and raise costs considerably and will limit the headset’s use to one individual.
All in, while the Bigscreen headset has not been field tested yet, the company’s more practical development direction gives hope that VR brands understand that they have a number of major hurdles to cross before VR headsets are everyday items.  Developers want all the bells and whistles, but that is not always what the average consumer wants, and they certainly don’t want a headset that feels like a squirrel is sitting on their head.  Image quality is certainly a major consideration with VR headsets, but some of the add-ons make only minor improvements and add to the bulk of the headset.  Absolute size and weight comparisons are hard to make without having the devices in physical reach, but we compared the images of the Bigscreen Beyond against the Sony (SNE) Playstation VR2, which sells for $550 and weighs 550 grams, and the Meta (FB) Quest Pro, which sells for $1,000 and weighs 722 grams.

We are taking this pre-holiday Friday off to do some holiday shopping, however we must note that the NFT world was taken by surprise yesterday when former President Trump made what was thought to be an announcement as to his 2024 running-mate, but turned out to be the announcement of a series of Digital Trading Cards showing the former president as a variety of characters.  The collection consists of 45,000 NFTs[1] that sold for $99 each, with none of the cards having more than 20 copies, and some limited to as few as one copy. The buyers are not able to select the cards they are buying as they are randomly chosen upon purchase.
Then there are the ‘deals’ that go along with Trump card purchases as a sweepstakes event.  These are taken from the promotion on the “Collecttrumpcards.com” site, with the details added by us, along with the stated value, which is only given in the detailed sweepstakes rules:

• Really Big Prize – Gala Dinner with Donald Trump at Mar-a-Lago including: ($75)

The finest dinner prepared by a top chef
The presentation of D. Trump videos, photos, and footage
Music playing throughout the evening
A branded Trump 45 Wine glass, that you can take home
Plenty of fantastic photo opportunities
Note: The sweepstake details point out that this is a 2,000 person dinner

• Meet & Greet with D. Trump ($0/Priceless)

             Exclusive meet & greet for cocktail hour at Mar-a-Lago with D. Trump
             A chance to chat with the former President and ask questions
Note: The sweepstake details point out that this is a 200 person group that lasts for 30 minutes

• Individual Meeting with D. Trump ($0/Priceless)

             An individual sit down with the former President at Mar-a-Lago in his private club
             “Ask all the questions you want and get all the advice you can handle from the man who changed America”
Note: The sweepstake details point out that you get 20 minutes

• Golf with D. Trump   ($300)

             Play for 1 hour in a foursome with D. Trump at his Palm Beach golf course
             If you are not a golfer you can trade your prize or sell it.

• Zoom Call with D. Trump  ($0/Priceless)

             Ask all your questions over Zoom (10 Minutes)

• Group Zoom with D. Trump  ($0/Priceless)

             Lucky winners will be able to join this exclusive group meeting
             Note: The sweepstakes details that the call will be with 2,000 participants and will last 20 minutes with no guarantee that any questions will be answered

• Hand-Signed Memorabilia  ($100)

             Signed photographs and other memorabilia sent directly to you

• Gold Digital Trading Cards   ($100)

             There will e a limited number of rare Gold Edition cards that are digitally signed by D. Trump with an actual video of him signing your gold edition collectible.

• Books!    ($75)

             You could win a copy of one of D. Trump’s books, with some being signed by the former President (Specifically “Our Journey Together”)

• But Wait there’s More!

             18 holes at the Trump International Golf Course (D. Trump will not be in attendance)   ($575)
             Dinner for two at the Trump Hotel in Las Vegas (D. Trump will not be in attendance but you will be treated as a ‘friend’ of the President)    ($250)
             Dinner for two at Mar-a-Lago (D. Trump will not be in attendance but again you will be treated as a ‘friend’ of the President)    ($250)
             Dinner for Two at Trump Tower in NY (D. Trump will not be in attendance but his office will call to make sure they know you are family)     ($250)
             Mystery Prizes of Trump Memorabilia
As part of the initial offer, if you were to purchase 45 cards, you get 45 entries into the sweepstakes shown above PLUS a guaranteed dinner with D. Trump.  We do note that according to the sweepstake rules, you can enter without having to purchase anything as long as you are over 18 and not living in Balkans, Belarus, Burma, China, Cote D’Ivoire (Ivory Coast), Cuba, Democratic Republic of Congo, Iran, Iraq, Liberia, North Korea, Russia, Sudan, Syria, Zimbabwe, and the Crimea, Luhansk and Donetsk regions of Ukraine, or a family member of the sponsor, by send a SSAE to the location shown below in Newark, NY.


[1] 1,000 will not be sold in this offering

While the Trump campaign or the Trump organization receives nothing from the sale of these digital cards, they were licensed to NFT INC LLC, a company that shows two addresses in Park City, Utah, both in strip malls that don’t seem to show the company in any listings but have UPS stores containing rentable mailboxes.  Not that we are saying anything untoward about the company, only that they don’t seem to be well known.  That said, NFT Inc LLC has licensed what we assume are the rights to Trumps image from CIC Digital LLC, aka CIC Ventures LLC, a company set up last year that has the same address as Trump’s Golf Course and is run by Nick Luna, Trump’s former White House Trip Director, and John Marion, one of Trump’s former lawyers.
All in, this is obviously a deal sanctioned by the former President, who is the ultimate beneficiary of the licensing fees, and likely other incentives (perhaps the 1,000 NFTs that are held from the sale?), and while Trump has mentioned his dislike for the crypto world on occasion, Melania Trump’s NFT collection might have pushed him toward this release.  Based on what we can see on Opensea, the most recent sale was of card #28389, which sold for $398.88, while most of the other (many) listings in the $200 - $250 range.  We took a few samples from the collection as shown below.
It is hard to make any comment about this exciting glimpse into the mind of a former President of the United States, but it does give historians another way to illustrate what life was like during the Trump administration and could serve to remind us of how the former President views himself.  While it is certainly entertaining to see the levels of embarrassment that the former leader of the US can bring to himself while not being embarrassed himself, but it does little to help the image of the US as a leader among Democratic nations.  JOHO.
 

https://twitter.com/i/status/1603442427473571841
​

​If you don’t know what Web 3.0 is, you should not feel left out, as the term has a variety of meanings, depending on who you ask, although the basic premise is a system based on blockchain, a decentralized form of data storage that breaks data into ‘blocks’ containing a ‘header’ that identifies the block, the data itself, and a number of ‘identifiers’ that includes descriptive information about the parameters of the block, including some that are used to validate the block before it is processed and others that describe the data.  The blocks, when verified, are added sequentially to the blockchain network, with the links to the previous block creating a chain that cannot be broken, which, in theory, makes the data (transactions, etc.) unalterable. 
After a block is validated it is added to the network, which means every computer on the network has a record of the block and the particular characteristics of the data, whether it is a transaction or or other data.  Only certain nodes do the actual pre-add validation process, but the key to blockchain is the data is ‘copied’ (not actually copied but ‘known to’ all of the computers on the blockchain network, which means if someone tries to change a block on a particular computer, other computers will recognize that the ‘identifiers’ (hash) has changed, as the link to all subsequent blocks will change and the blocks will fail the ‘challenges’ (basically a check to see if the hash is correct) and the data will be ‘unconfirmed’. 
Depending on the network, the number of confirmations needed varies, but without the required number of confirmations the data is not valid, so the more confirmations blocks have the more ‘secure’ the data is considered.  Given the complexity of the algorithms[1] used to confirm a block, confirmation time can vary and this is where ‘miners’ come in.  As transactions are uploaded to the network they enter a ‘pool’ before they are added to the blockchain.  Miners can select these unprocessed transactions, on which they run the complex validation algorithms to confirm the transaction blocks at which point they are added to the blockchain.  Since the mining process is expensive in that it requires high-speed processing which consumes considerable power, each transaction in the pool carries a transaction fee determined by the originator of the transaction.  Miners will take those transactions with the highest fees from the pool first, which means that those transactions that offer lower fees to miners will take longer to get added to the blockchain.
In Bitcoin, mining a block takes about 10 minutes (equal to one ‘confirmation’) so it can take considerable time for those transactions that want more security than the typical three confirmations needed for bitcoin transactions.  In order to speed up the process other networks like Ethereum use a system called POS (Proof of Stake) as opposed to the POW (Proof of Work) system described above, which is a simpler system that allocates block publishing through a lottery using the amount of each ‘stakers’ (equivalent of ‘miner’) holdings across the network.  The POS system reduces the hardware and energy requirements needed to publish blocks to the blockchain network, although it is said to give large stakers more control over the network as the more funds a staker has on the network, the more chance they will be picked to post the next block.
So what does this have to do with our fondness for data?  Web 3.0’s decentralized approach to the internet, as opposed to Web 1.0 (static content) and Web 2.0 (user-generated content), Web 3.0 gives the promise of increased transparency and the security that transparency should provide, and consequently move power away from some of the companies that exert significant control over the internet (Facebook (FB), Amazon (AMZN), etc.).  Of course, this is still up for debate, and our suspicious/cynical nature leaves no doubt that such an idealistic goal will find was in which to be corrupted by ‘other’ power/money hungry companies/institutions as Web 3.0 develops, but in the interim, there seem to be plenty of investors willing to pump billions into private companies that they believe will be the ones that will benefit from Web 3.0.
VCs pumped ~$4.3b and $4.9 into Web 3.0 companies in 2019 and 2020, but really caught the bug in 2021, where that spending increased by 571.5% y/y to almost $33b, and while 2022 has seen a considerable slowdown in VC funding activity, based on the spending in the 1st half of this year and the seasonality of 1H/2H Web 3.0 VC investments, one might assume that  the 2022 estimate derived from 1H VC spend for Web 3.0 this year, would only decline by ~3.1% to $31.78b, as shown in Figure 1.  That said, the detail shown in Figure 2 gives a different outlook on VC Web 3.0 spending for the year given that 3Q spending fell by 89.1% q/q/ and 89.9% y/y to $0.72b, and while we would hesitate to make a stab at a realistic 4Q estimate given the almost inconceivable volatility this year, we would guess that given the current macro environment, it would lead to a lower 2022 spend than the statistical estimate in Figure 1 shows.
Perhaps funding to VCs with a penchant for Web 3.0 investments has slowed and private valuations are reflecting a bit of the lower valuations the market is placing on public companies, however investor optimism on a long-term basis, despite the weak 3Q, seems to have remained high, so as long as VCs are able to exit investments profitably over the remaining few months of this year and the 1st half of next, we expect funding will improve a bit from 3Q’s $0.72b, but while crypto companies are still a relatively small part of overall VC Web 3.0 investments, the rather poor performance of crypto this year casts a negative light on the space to some degree.  Blockchain is certainly a valid data storage and valid technology, especially for financial transactions but the massive spike in early stage investments seen last year and earlier this year might moderate a bit as VCs become a bit more selective toward potential investments.


[1] SHA-256 – A cryptographic function that always produces the same output (hash) for a given input.  There is no known way to figure out what the input should be to get a specific output, so miners must try millions of input combinations before they can match a block’s hash identifier which is 256 bits.

While the undercurrents in the tech space over the Metaverse have been around for quite some time, but when Facebook (FB) changed its name to Meta and began its proselytizing of the Metaverse as the ‘wave of the future’, the media began to churn out article after article on how we will all be spending much of our lives wandering through endless worlds, allowed to do all of the things we cannot in the real world, and, of course, buy lots of stuff, much of which does not exist in reality.
Along with the media hype, company executives called emergency meetings to brainstorm with staff over how they could capitalize on this brave new world where folks might be willing to pay for things that don’t cost anything to make, a concept that puts a smile on the face of every manufacturing VP.  In reality (sorry), there are costs associated with the Metaverse, particularly advertising and content creation, although the cost of content creation for the Metaverse is a fraction of the cost of almost any physical product.
Once those meetings occurred the word went out that corporations large and small needed to create new ‘teams’ that can devise and execute a strategy that would move the company onto this new platform known as the Metaverse.  Job postings with the word ‘VR’ began to creep up after the Facebook rebranding, but things really took off at the beginning of this year, doubling the 2021 high point in January and reaching almost 4x the January number by April.

Since then however the bloom is off the rose so to speak, and the demand for VR related jobs seems to have slowed back to January levels, with IT consulting firm Accenture (CAN) posting far more VR related job postings than Meta.  Meta VR jobs focused are on R&D, likely ways in which to improve and reduce the cost of the VR experience, given their desire to seed these new virtual worlds that will provide an additional source of user data that can be sold to customers looking to tailor their Metaverse ‘worlds’ to specific buyer groups.  Accenture seems to be headed more toward content creation, a market that does not require an investment in the manufacturing of physical hardware.

​While content creation in the VR world is more complex than what we are used to seeing in 2D mode, content creators from the gaming industry tend to be well-versed in visual 2D development and have a leg up on those making the transition from print on static media creation to VR.  Tools like Unity (U), Sumerian (AMZN), and Unreal Engine (pvt) are familiar to game developers who can relatively easily make the transition to VR once they master the nuances of 360⁰ cameras, but now they will have to contend with a bit of competition for VR jobs, as hiring has slowed considerably as consumer spending in the CE space has slowed.  With medical school costing between $130k and $230k in tuition alone but an average salary of ~$210k for physicians, the potential for a profitable return from a medical education certainly exists, but with the average income for a software engineer being ~$120k, with a relatively low cost up front, one can see the attraction.  Now someone just has to figure out what the Metaverse is, other than a concept, and businesses can get back to hiring and get those developers out of their parent’s basements and into the workforce…

​If nothing else, the Metaverse is an advertising tool with unlimited potential.  Since there is no official definition of ‘the Metaverse’ it can mean anything from a 2D avatar to the potentially vast 3D experience that would allow users to wander (and spend) in worlds that do not exist in reality.  In the interim the mention of the Metaverse elicits excitement from a select group of technologists, many of whom are involved in the collection of consumer data, and hip retailers who see potential to sell both physical and non-physical products.
That said, we are not surprised to see a tech rag headline “HTC (2498.TT) Launches Metaverse Focused Phone” pop up in relation to HTC’s recently announced Desire 22 Pro smartphone (July release).  The phone has a 6.6” LCD display with moderate resolution, based on  a Qualcomm (QCOM) Snapdragon 695 (6nm) chipset and an 8 core4 Kryo CPU, along with 4 cameras and a decent size battery that will sell for ~$480.  HTC’s promos for the new phone tout it as “Swift, Versatile, Dynamic Desire 22 pro is the phone to carry you into the future.  Designed for immersive experiences in a world where the physical digital, and virtual interconnect – and with the capacity to run 2D and 3D content on extended reality (XR) devices.  Get ready to add a new dimension to the way you live, work, and play.”
As one reads further into the promo one gets a better understanding of the gist of the promotion as Viverse, HTC’s Metaverse ecosystem, is quickly referenced as where you can use the phone to “‘visit Metaverse communities (in Viverse) using your phones browser, or pair the phone to your HTC Vive Flow VR headset”.  While the ad goes further in describing the phone’s ability to provide “‘images, videos, and games in stunning clarity”, and allows the phone’s owner to “enjoy a rich view of the Metaverse even without a VR headset (using Viverse)”, when looking at the ability of the HTC Vive Flow headset to pair with smartphones, one finds that not only are a number of HTC’s smartphones able to pair with the Vive VR headset, but phones from Asus (2357.TT), Honor (pvt), and Huawei (pvt) will also do the trick, making the new phone just one more mid-priced 5G smartphone.
With Meta painting a picture of the Metaverse (their version) through its TV ads and flashy retailer campaigns that are sort of ‘Metaversy’, although mostly 2D, the advertising world is trying to help consumers understand what the Metaverse is, even if they themselves don’t know, as long as there is the potential for spending, either at the business or the consumer level, which makes it even more difficult for the average person to understand what relevance the Metaverse might have to them.  That said, it does make the concept, whatever that might be, more familiar to consumers generally, essentially seeding the idea of a new paradigm for consumers sometime in the future.  Until there actually is a Metaverse that is easily accessible to the general public and has some intrinsic value, advertisers will use the Metaverse as a way to indicate their products are what would previously have been called ‘futuristic’, ‘leading edge’, or ‘revolutionary’, sort of an advanced ‘lipstick on a pig’ concept.  Perhaps one day there will be a true Metaverse (our definition) but until then its just one step above ‘new and improved’ or ‘you can lose 10 lbs. overnight!’ advertising that tries to differentiate what are undifferentiated products.

The Nike (NIKE) Air Force 1 was the most popular shoe in 2021 according to eBay and data shows that while much of the US population remained indoors for much of 2020 athletic footwear grew more than 35% y/y in the first six months of last year.  Sneakers and running shoes are so popular among the buying public that certain Air Jordan models can sell for over $6,000 (new) and Michael Jordan’s actual used sneakers have fetched almost $200,000 at auction.  Having been around commercially since the 1920’s sneakers became de rigueur when vulcanization, the process used to strengthen natural or synthetic rubber, made it possible to fuse cloth to rubber, and as the legend goes, two brothers started a sports shoe business in a small German town.  As their wives did not get along the two brothers eventually going their own ways, with one creating Puma (pvt) and the other Adidas (ADS.GR).
While the folklore is interesting, sneakers are utilitarian, comfortable, and can certainly be a status symbol, but what does this have to do with consumer electronics and technology?  Yesterday Xtep (1368.HK), a leading sneaker manufacturer in China with over 6,300 stores across the country (Jeremy Lin is its spokesperson) released a new and special sneaker collection that sold out in 70 minutes and the special limited edition gift box set sold out in 10 seconds, all of which were part of the company’s 160X 3.0 collection, but at the same time the company also released the 160X-Metaverse NFT collection , the first ‘professional virtual running shoe’ collection that were priced at $252.53 a pair, and sold out in the abovementioned 70 minutes, and as they were sold using NFTs, they will remain one-of-a-kind forever. 
So to make this clear, the 321 pairs of these shoes so not exist in the real world but are likely to make your virtual feet feel very comfortable when you are doing your virtual run in the around your virtual plot of real estate in the Metaverse.  While the company touts the non-virtual sneaker line’s rolling carbon-fiber plates that add 5% to propulsion power and 20% to stability, they don’t say if the virtual items have the same improvements, so we would be careful before building too much into such a purchase as we expect that any day another sneaker company could come out with a better virtual sneaker could give you 10% more propulsion during your virtual runs.
Of course, the idea here is that such virtual items will have a growing intrinsic value in the virtual world that collectors will be willing to pay more than $253.53 (no applicable sales tax, but likely a number of fees) for as the Metaverse becomes where we live.  While the company earned $81,383.13 on the sale, we suspect that given the manufacturing cost of almost zero, the shoes were quite profitable and would encourage Xtep to release more such items in the future.  Taking it a bit further, perhaps we could expect the company to reduce its physical production capabilities, where it has to pay workers, purchase machinery, pay for utilities and the like, and become a ‘virtual’ shoe company with a few computers for design and a fancy Metaverse site.  Makes business sense, right?
Not these…

Or these...

Or these...

But these...

​At Samsung Electronics’ (005930.KS) shareholder meeting the company once again indicated that the Metaverse was one of two areas that it has selected as new growth businesses (the other is robotics).  Samsung’s Vice Chairman indicated that he would actively seek business opportunities in Metaverse which sparked renewed speculation that the company was preparing to announce or release a “Metaverse Device”, as he indicated last month at Mobile World Congress.  As we noted previously, no specifics were given although we noticed that the company’s Metaverse site 837X (Decentraland) is closed until March 21 when a new event is planned.  While this could be nothing more than new merchandise, it would be a good place to drop a few hints to the AR/VR community.
Given the extreme hype surrounding the Metaverse and Samsung’s expertise and history in the display space, it is easy to connect the dots as to Samsung’s eventual plans however as we noted in our 3/1/22 note, Samsung has been in and out of the VR space before and will likely take a more realistic approach to the AR/VR space in this go-round.  However they cannot keep the Metaverse chatter going forever without a distinct product so we expect at least a glimpse of a product before the holidays this year.  If nothing occurs by the end of 2Q we expect there will be a slew of questions as to why such a device/product has not been revealed and pressure on management will be intense, so unless we are wrong and the current Metaverse talk is just ‘Chairman Speak’ (Why promise if nothing is almost ready?) Samsung should be back in the VR/AR world this year.

Samsung Electronics’ (005930.KS) Vice-Chairman announced during a meeting with reporters at Mobile World Congress, that the company is preparing devices for the Metaverse platform, such as AR glasses.  He noted that ‘it is difficult to specify the release date right now, but the development is in progress with a focus on completeness.’  When pressed if that meant a product sometime this year he replied, ‘The quality of the product is important’, adding the general comment that ‘It is important to create mutual experiences between products and to give value to consumers’, all of which leads to no answer to any of the important questions concerning Samsung’s actual plans for the Metaverse.
While we would not expect much from Samsung executives in the way of product release dates, such replies were so vague as to be distracting and annoying, but given Samsung’s premier place in the CE space, it would be difficult for the company to not have a number of Metaverse related projects in development, particularly given their expertise in a number of areas that are key to AR/VR hardware development.  In 2015, in cooperation with Oculus (FB), Samsung released a VR ’quasi-headset’, a device that used a Samsung smartphone as the display, more to show what VR’s possibilities were to both developers and consumers.   In 2017/2018 Samsung released the Odyssey and Odyssey+ VR headsets, both of which were PC powered and based on Windows Mixed-Reality and Steam (pvt) VR, neither of which are still being produced.  The headsets were $500 each with controllers and had two OLED displays (1440x1600) that had an odd pixel configuration that had alternating pixels of red and green and red and blue. 
Despite favorable reviews Samsung terminated support for the Odyssey VR headsets in September of 2020 and the original Samsung XR website is no longer but Samsung has been developing a number of technologies that are applicable to VR, such as holographic devices, that the company has been quietly demoing for years and micro-OLED and micro-LED displays that have potential for AR/VR product development.  That said, Samsung would have to compete with Facebook’s Oculus brand, which is the most popular VR headset due to its relatively low price and admirable specifications.  As Facebook is obviously seeding the market and losing money on every device, Samsung will face the difficult task of creating a device that can compete, as we expect Samsung will not consider sustaining losses on a new product category for an extended timeframe.
Samsung is involved in the development of many display oriented projects, not only through its affiliate Samsung Display (pvt), but through affiliations with many companies and institutions with whom it has partnered.  On such that is still in the development stage has developed a way to produce displays with ultra-high resolutions, up to 10,000 pixels/inch, which is far above the more typical 400/500 ppi seen in most smartphones.  While such a project is still far from mass production, Samsung is one of the premier image sensor producers, has extremely sophisticated semiconductor capabilities, and has already developed Micro-LED displays for larger systems.  While each of these projects and the multitude of others that Samsung is participating in do not individually guarantee a commercial AR/VR product, we would expect that Samsung has little choice but to hop on the Metaverse train with at least some hardware this year or next.  Perhaps initially as a component or module supplier, but as the AR/VR market develops, it would be hard for Samsung not to participate.  The biggest stumbling block in our view would not be the hardware, but making the devices ultimately compatible with Samsung’s other devices, as while Samsung is big on advancing technology, they are there to sell stuff by ‘creating mutual experiences between products’, as noted above.

​China has taken a relatively hard stance toward cryptocurrencies and their supporting ‘organizations’, above and beyond the usual bans on ‘inflammatory content’ or ‘processes antithetical to the cultural and personal well-being of the Chinese population’, but when it comes to the manifestation of the Metaverse, it is much harder for the Chinese state to codify rules, given the ephemeral nature of the Metaverse itself.  That said, the China Banking & Insurance Regulatory Commission issued a ‘Risk Reminder’ yesterday that presented warnings about potential illegal fundraising schemes that seem to be surfacing as the Metaverse garners headlines.
“Recently, some lawbreakers have rubbed off on hot spots (Google (GOOG) translation) and absorbed funds in the name of "Metaverse Investment Project" and " Metaverse Chain Tour ". They are suspected of illegal fundraising, fraud and other illegal and criminal activities,” is how the article began, and then went into more specifics as to what the scams were and what to watch out for, with the first being the fabrication of false Metaverse investment projects, such as game publication, artificial intelligence and virtual reality projects that publicize high returns in order to raise funds, although that seems of little difference from the multitude of scams that US investors face whenever a technology fab comes to the forefront.
The note goes further, citing those that claim “you can make money while playing games”, with the warning that the exchange of virtual currencies and the purchase of the game equipment needed to ‘farm’ such high return schemes is both costly and garners the risk that such operators may close the game at will (this has happened recently) and made it almost impossible for players to retrieve both their original investment and any profits that they might have thought they made.  Then the warning heads into one of our favorite areas, that of Metaverse ‘real estate’, where the ‘lawbreakers’ exaggerate the expectation of virtual real estate price increases and artificially create ‘the illusion of panic buying’ to induce trading, but the most telling is the reference to virtual currencies’ that criminals induce the public to buy in anticipation of it becoming ‘the Metaverse currency’ in the future, while manipulating the price and setting withdrawal rules that generate high fees or make it almost impossible to cash out.
While there doesn’t seem to be anything mentioned in the note that we haven’t seen at least a few times, it seems a bit more comprehensive that the warnings we have seen from the FTC, which are focused on scams where unsuspecting  folks are conned into making various payments (IRS, utility company, outstanding tickets) by converting their hard-earned cash into crypto at an ATM (they will provide you with the nearest one and stay on the line as you make the transaction) when they will send you a QR code that will transfer the money into their account, forever lost to you.  Since that would likely trigger wire fraud, it would be relatively easy to prosecute should the fraudster be found, but rules about some of the more esoteric schemes mentioned in the Chinese note have yet to be written or even contemplated.  Warnings are a start as they alert at least a part of the population to such antics, but there are many across the globe that are gullible enough to believe that they can get something for nothing and will give fraudsters a whole new platform in which to work.  If you haven’t seen “Glengarry Glen Ross” then you are ripe for a Metaverse scam.

​The Metaverse is, if nothing else, the point at which the CE space generates the most current hype, with companies making sure to mention their connection to the Metaverse, however tenuous, at every public juncture, while investors seem to be willing to assume such massive growth that valuations become meaningless.  While crypto currencies have their own issues, much of the Metaverse hype is tied to crypto and NFTs, where the days of the Gold Rush, tulip mania, and the more recent dot.com bubbles look modest in comparison.  That said, does the hype continue into 2022 and beyond or does it slowly fade away as the reality of the Metaverse becomes more apparent? 
Since the Metaverse, in its real form is based on VR, while development of flashy Metaverse ‘universes’ will continue and tools to develop then get better, we believe the limitations imposed by VR headsets will bring the hype down to a more reasonable level with large stakeholders generating hope and hints of extraordinary and easy to come by wealth, while unit volumes remain the metric to watch.  In that regard, we note that Facebook’s (FB) Oculus VR headset line is without question the most popular VR headset, and has been for a number of years, accounting for between 73% and 78% of the VR market last year.  The next iteration for the Oculus line is expected to be the Quest Pro, wireless headset with eye tracking, face tracking, and a slew of extras such as local depth sensors that can map the user’s environment to the display or sense when someone enters their movement field and a ‘record’ function that captures a few seconds of VR data that can be played back before resuming the game.
The new Oculus headset is expected this year, and while component shortages and similar issues might push that toward the 2nd half or into 2023, the Metaverse hype machine will restart when the headset is released.  In the interim, the Metaverse publicity machines will shift a bit toward AR, where the Metaverse itself is not directly involved but could help to keep Metaverse momentum alive until the seminal Oculus event.  AR does have some direct and practical applications and as it does not exclude the user from reality, is a less immersive but more ‘natural’ (we use that term loosely) and easier to accomplish from a technical standpoint.  That said, nothing helps to move technology forward more quickly than the profit motive and while manufacturing and business applications for AR are the ones that will pay premiums for hardware and service, everyday AR applications that can give the user the ability to visually search will likely be the topic of focus for AR this year.  If and when a manufacturer can come up with a truly wearable AR ‘headset’ that can use eye tracking to pull up information on products as the user walks through everyday situations, the Metaverse will become secondary to the sales gathering potential for AR.  Maybe Apple (AAPL), Google (GOOG), Facebook, Xiaomi (1810.HK) or Vuzix (VUZI) will make that happen this year, but until then we will have to be content with reality.
We estimate Oculus headset shipments for 2020 and 2021 below.  More to come…