“VR/AR is the next generation’s main computing platform and communication platform” (Facebook CEO Mark Zuckerberg)

Virtual reality, or VR, rapidly emerged as a key player in future industries following Facebook's acquisition of Oculus for $2 billion in 2014. Leading global IT companies are now scrambling to actively foster their VR businesses. Companies seeking revenue streams in the post-smartphone era are bustling about, as if virtual reality has literally appeared as "real reality."

In particular, the VR craze originating from the U.S. feels like a whirlwind in China. According to Chinese research institutions, the size of China's VR market reached 1.5 billion yuan in 2015, and grew to 5.6 billion yuan—more than three times—in just one year, 2016. It is predicted that this market will grow tenfold to 55.6 billion yuan by 2020.

This difference can also be observed in the scale of VR/AR investment. China's investment volume, which was merely 0.1 billion yuan in 2012 (compared to 500 million yuan globally), reached 1.5 billion yuan in the first half of 2016, accounting for one-fifth of the global market (7.9 billion yuan). Starting in the second half of 2015, Chinese listed companies and industrial funds began investing in VR/AR, and this is expected to expand with investments from major Chinese funds in the second half of 2016. This scene offers a glimpse into how China views the importance of the VR/AR industry.

▲ China Storm Mirror VR

Wu Jingwei of Greenpie Storm VR Industry Fund, who attended the Korea-China Virtual Reality Industry Workshop held on the 7th, said, “The fact that large-scale industry funds began investing in VR in the second half of last year is an unusual move not seen in other industries. In particular, the fact that more mainstream funds have been investing in the VR/AR industry since the second half of 2016 is a very optimistic sign for the industry. It is especially encouraging that even conservative funds are investing in this industry.”

In addition to these companies, Chinese capital is also flowing into major VR firms. Magic Leap, a company with an asset valuation of $4.5 billion, is receiving significant interest from Chinese capital, including Alibaba. In the case of NextVR (asset valuation of $800 million), which is currently in the spotlight, the investor is known to be a Chinese company called NETEASE.

So, how does this Chinese capital view the VR industry? Wu Jingwei, CEO of Storm Mirror, predicted, “We consider the VR industry to be a complement to the internet industry. From the present to the near future, VR products will not deviate significantly from their current state. However, they will play an important role in industrial applications.”

Judging by his words, it means that the VR industry plays a role that complements other businesses, not the main business. It likely means that rather than viewing the VR industry as a golden goose right now, they are keeping an eye on its applications with other industries.

Let's hear more of his story. He explained, “I am interested in whether VR will realize true miniaturization, but I do not expect to see exceptionally outstanding products within the next 5 to 10 years. If such a product were to emerge, it would replace mobile phones and displays, but that is not something that will happen in the short term. I think it is something that could happen in 15, 20 years, or even further in the future.”

The point is that product value depends on convenience (portability), and it is anticipated that it will take time for such products to emerge. At the current stage, investments and product development are being pursued based on the expectation that VR will be utilized more in applications across other industries, rather than for its intrinsic commercial or utility value.

In addition to CEO Wu Jingwei, Chinese VR entrepreneurs participating in the workshop also emphasized this point several times. Their message is that instead of viewing other industries through the lens of VR, one should consider VR in terms of its value for existing industries. In other words, this implies that VR should be used as a tool to revitalize existing industries, and that there must be clear content (killer apps) available to utilize VR.

This is something the domestic VR industry should also take note of. As seen in the recent Galaxy Note 7 debacle, the industry's foundation will become more solid only if software technology (including content) is developed in parallel, rather than focusing excessively on hardware-centric development. For example, effectively leveraging our game content development capabilities—which Chinese companies envy—in the VR industry would be one approach.