Saudi Arabia, through its Public Investment Fund, has injected $590 million into virtual reality (VR) headsets, putting pressure on Apple’s Vision Pro.
The investment was made into Magic Leap, a US company that makes headgear “that overlays virtual images into the real world,” in a move that will rival Apple’s goggles set for release in February.
A boost to Magic Leap
A filing from Magic Leap’s European unit shows that the “company issued $590 million of convertible debt to the Ultimate Parent Undertaking [the Public Investment Fund] in exchange for cash” in 2023.
Magic Leap has “never turned a profit yet,” according to a Telegraph report. The company initially released a set of augmented reality glasses in 2015, although they did not enjoy “much commercial success.”
But in the past two years, Saudi Arabia’s Public Investment Fund has become the company’s major shareholder after the company turned to shareholders for more funding.
Its latest injection into VR headsets has lifted Magic Leap’s total capital raised to over $4.5 billion, according to Proactive.
Since it was launched in 2010, the VR company has attracted investments from several companies, like Google and AT&T. The company also secured funding from other tech firms like Alibaba and Qualcomm, which saw the firm’s total value reach $6.5 billion in 2018.
However, depressed sales volumes for the headsets resulted in job cuts coupled with restructuring. By late 2021, its valuation had dropped to $2 billion.
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“Eye-watering” price tags
Apple is scheduled to launch its Vision Pro on Feb. 2, with a $3,499 price tag. Reports indicate that Apple’s Vision Pro, already shipping to distribution warehouses in time for the launch, will be exclusive to the US market. The device will be released to other countries later this year, with the UK, China, and Canada expected to be the first international markets to receive it.
The VR headgear will compete with Magic Leap’s and Meta’s products in the race for supremacy in developing VR and AR gadgets.
Magic Leap originally targeted a price of $3,299 for its customers, according to The Telegraph, but the company has since pushed the headgear towards corporate clients.
The report further indicates the company is also planning to license its intellectual property to fellow tech firms.
Last year, reports indicated Magic Leap was in talks with Meta to use its designs in a deal that experts said would give Meta “serious AI credibility.” According to Yahoo Finance, Meta had focused on VR, but a collaboration with Magic Leap would boost its mixed reality vision.
As a result, AR would provide “a new avenue for Meta, which has had to battle VR skepticism, dwindling metaverse interest, and a cash-burning research and product operation that’s far from profitable.”
The competition
According to the Financial Times, Magic Leap did not comment on the exact partnerships but acknowledged signing “commitments to license its IP and manufacture optics for multiple companies.”
Despite the reports of possible collaborations with fellow tech companies, Apple may be thinking otherwise as they see themselves ahead of the competition.
Its CEO, Tim Cook, spoke highly of their headset: “Vision Pro is years ahead and unlike anything created before.”
The global VR headset market was estimated at $7.77 billion in 2022. Between 2023 and 2030, the market is projected to grow at a compound annual growth rate (CAGR) of 30.6%. Asia Pacific is expected to pace the fastest, registering a CAGR of 32.9% between 2023 and 2030 on the back of increased VR tech developments, gaming, and adoption in the entertainment sector.
One of the factors expected to drive this growth is demand for gaming consoles, while virtual technology also has vast potential in medical training, education, and industrial prototyping. In terms of financial performance, a revenue forecast of $59.63 billion is set for 2030.
However, sales of AR and VR glasses in the US fell 40% to $664 million last year, according to data from a research firm known as Circana. This was steeper than the decline of 2% to $1.1 billion, which was experienced a year earlier.
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