With a population of over 1.3 billion of which 48% are internet users (1) and over 632 million (2) are mobile subscribers, China represents a huge opportunity for technology companies. China now has the world’s highest penetration rate for smartphones and its adoption of 4G passed 250 million users in July (3) which is more than double the subscribers in the US.
One technology sector expected to see significant growth in China is augmented reality. The mobile AR market in China to grow at a CAGR of 110% over the next five years (4) driven by smartphone growth and local vendors such as Baidu, Renren and Tencent who have already invested in AR technology and are expected to launch several mass-consumer apps that can attract more consumers within the next 1-2 years (4).
The AR market has been growing since the early 90s and it is still in an early development phase (5). But 2014 saw a steady growth of AR products in China from players such as Pleco, Waygo, Sight+, Tapu, RealMax and NeoBear. This year’s major milestones in AR in the foreign market such as Apple’s purchase of Metaio and Google’s investment in Magic Leap have made a dramatic impact on the Chinese market, pushing it to grow faster. By as early as 2019 the Chinese AR market is expected to hit a period of steady development leading up to 2031 when it is expected to hit its maturity (5).
But in order to succeed in this market, it is important to understand the political, social, and technological factors in play which contribute to AR finding success in China.
The Chinese market is a political one. With the new leadership least year in the Third Session of the 12th National People’s Congress of China came with it new strategies and information which shaped the economy and market direction.
One of the most influential strategies is “Internet Plus”. China’s new “Internet Plus” action plan seeks to drive economic growth by integrating internet technologies within all aspects of business and life. From online shopping to on-demand delivery services ranging from hailing a cab to hiring a nanny, the Chinese government is providing its support to technology companies who are using connectivity to transform their business.
In addition to “Internet Plus” another influential political shift is in China’s first large data exchange which opened earlier this year with its first transaction between Tencent, China’s largest and most used Internet service site exchanging their data with JD.com. This new exchange is said to have been opened with 50 million yuan ($8 million) by five companies. The data exchange market is currently valued at around one trillion yuan (6). The Data Exchange harnesses the growing opportunity of “Big Data” by providing services such as data cleaning, modelling and data platform development as well as facilitating trading of big data between clients.
As both connectivity and data are the root of augmented reality solutions, the introduction of both Internet Plus and Data Exchange lay a critical foundation for AR companies to succeed and assist in pushing the AR industry forward.
With over 632 million mobile subscribers and over 250 million 4G users, Chinese are heavy users of the mobile internet for a variety of purpose including consumer-based smartphone shopping, payment, navigation, and watching videos. Mobile payments using apps such as Alipay from Alibaba and WeChat from Tencent is common place. With 350 million registered users and 270 million monthly active users Alipay Wallet usage is growing fast and with it shaping Chinese consumer habits especially in grooming uses to scan QR codes for transactions (7).
In addition, apps like WeChat afford an effective way to market. On February 26, AR Dancing Bear App – Fantasy of Kaka went viral on WeChat for Chinese New Year. That morning the iOS app was installed over one million times and by the 28th it had reached two million downloads (8) on both iOS and Android platforms making it one of the most successful AR apps in Chinese history. The app asked users to scan a QR code which then triggered a 3D dancing bear to appear in physical space.
The scanning and social behavior of the consumer behavior are two fundamental habits which nurture a fruitful user environment for AR in China.
The Chinese mobile phone manufacturing industry is shifting. Domestic phone manufacturers are growing in marketshare providing affordable phones well equipped with the universal sensors and accessories required to enable AR experiences.
Where in 2014 foreign players such as Apple and Samsung owned a large portion of the mobile market, China is seeing a shift in domestic player growth. In Q3 of 2015, Xiaomi, Huawei and Oppo have 44% of the mobile market compared to the 22% between Apple and Samsung (9).
In addition to local players making waves in the mobile hardware space, there has also been considerable traction in the augmented reality software space from domestic players. Both Sight Plus and HiSense released SDKs this year to compete with the foreign AR companies such as Metaio (now Apple) and Wikitude.
The Chinese AR technology ecosystem is also heavily influenced by trends in the foreign market. With foreign giants such as Qualcomm (now PTC), Google, Intel, and Apple making plays in the AR space, Chinese companies are following suit.
Education and Toys: AR Success Stories
One of the strongest examples of successful AR implementations in China is in education and toys. The Fantasy Kaka Bear mentioned earlier is a great example of this. As is the recent Sphero-Tencent partnership (10) which introduced the Weibao app-enabled robot ball to the market this year. Like the US Sphero, Weibao is controlled through a smartphone app which also enables augmented reality gaming experiences using the robot.
NEOBEAR is another great example of AR in the toy industry and is a great example of a type of AR experience which is growing quite rapidly in China – AR cards. NEOBEAR sold over a million AR card sets during the 2015 Chinese New Year with the launch of its NEOBEAR Pocket Zoo. The Pocket Zoo cards teach children Chinese and English words while bringing animals to life through an AR app on their smartphone. The company has amassed more than 100 million Chinese yuan in its first year and recently closed a Series A investment of 120 million Chinese Yuan in September of this year.11
Where NEOBEAER is a great example of a successful revenue generating AR application, RealMax’s AR-enabled textbooks is one of the largest AR implementations in China. RealMax partnered with Pearson textbooks to update geometry and chemistry textbooks with AR-capabilities which will be made available in 2016 in Hong Kong (5).
The Enterprise Opportunity: AR Success Stories
Along with a major consumer emphasis there are also many companies in China excelling with the use of AR in the enterprise. KingSee Technology is now focusing on full terminal AR & VR job aids and training system development for smart glasses for the likes of Jiangxi Telecom, Crystal CG and other companies. China’s BYD Motor is one of the earliest in exploring to use AR smart glass with an R&D department dedicated to the use of smart glasses and AR in the use of the automotive industry.
Where China’s large population, especially of internet and mobile users present a massive opportunity for any tech company – recent changes in the political, social and technological landscape are paving the way for success in the augmented reality space. Understanding how to leverage the unique business methods and user behaviors particular to this region will be key for any company to thrive but it is clear that a mix of foreign and local talent will drive China towards widespread AR maturity by 2031.
- Interview with Sonny Xin – Augmented Reality Specialist in Asia, Former Head of Greater China at Metaio (Acquired by Apple) & Greater China Marketing Advisor at Wikitude