China Could Be Virtual Reality’s Dark Horse

Walk the floor of CES Asia in Shanghai this week, and you’ll see many familiar products. Big TVs, loudspeakers, internet-connected household appliances. But seemingly at every other booth, there’s also something else, and it always seems to draw crowds: virtual reality (VR) headsets.

A few of the bigger international players, including Hisense and Intel, have brought along demos of the HTC Vive. But many more local Chinese companies are showing off their own headsets. Google Cardboard clones, all-in-one mobile units, VR devices that look like sunglasses, augmented reality (AR) glasses that could pass as Google Glass: VR and AR are everywhere at the trade show.

The Pico Neo headset from Pico VR. The company aims to introduce the Neo this summer, and sell it in China for around 3200 RMB (close to $500).
Janko Roettgers / Variety

That in itself may not be a surprise. VR also was a big hit at CES in Las Vegas earlier this year, with attendees waiting hours in line to get a demo of the Oculus Rift headset, Samsung showing off its Gear VR headset to dozens of attendees at a time, and many companies giving away Google Cardboard viewers as the latest freebie.

SEE MORE: Samsung’s Gear VR Headset Now Has More Than 1 Million Monthly Active Users

However, you won’t find any of these products in Shanghai. Facebook is banned in China, so the company can’t sell the Oculus Rift there. The ban also is blocking Samsung from selling its Gear VR headset, which is based on Oculus software. And Google has long been absent in China to avoid the country’s censorship requirements, so the company isn’t officially promoting Google Cardboard there either.

This has led to a kind of vacuum for VR that local players are more than willing to fill. In fact, many are viewing this as a chance to go neck-on-neck with, and maybe even leapfrog, Western players. “For Chinese companies, we don’t always want to be the follower,” said 3glasses CEO Wang Jie during a CES Asia conference VR panel. “We also want to be the leader.”

The Idealens VR headset, which was shown at multiple booths on the CES Asia showfloor. Idealens wants to start selling it later this year for 2000 RMB (about $300).
Janko Roettgers / Variety

3glasses is one of a number of Chinese companies building its own VR hardware. Others include Idealens, which is developing a standalone mobile VR headset that doesn’t require an external PC or phone to run. Pico VR has a similar approach, but instead decided to put the computing power for its Pico Neo headset into a gamepad that’s connected to the headset at all times. Also noteworthy: Dlodlo VR, a company that’s developing a headset that looks like a pair of sunglasses and plugs into a portable external player.

SEE MORE: China’s Le Eco Boosts Ecosystem With Phones, VR and Car Launches

Mobile is a common thread for many of these Chinese VR hardware manufacturers; almost no one demonstrated high-end positional tracking similar to the functionality available with the Oculus Rift and HTC Vive headsets. “In China, we cannot develop very good sensors at the moment,” admitted Zhang Hong, general manager for Usens, a company that has been working on hand-tracking solutions. However, he also argued that Chinese consumers may just not be ready to spend thousands on high-end gaming PCs and VR headsets. “We do not target these consumers in China,” he said.

The Avegant Glyph headset, which combines a headphone with a small screen, is made by a Silicon Valley-based startup that received a major investment from a Chinese hardware distributor last year.
Janko Roettgers / Variety

Chinese companies aren’t the only ones looking for a middle ground between high-end, gaming-focused VR hardware and much cheaper headsets that need a phone to run. Google is reportedly working on its own standalone headset, and Samsung’s head of R&D for software and services Injong Rhee recently revealed that his company is working on a standalone solution as well.

Samsung’s and Google’s efforts will have to compete with a number of Chinese devices from the onset. “A lot of Chinese players will develop such products,” Hong said, adding confidently that Chinese companies are currently outperforming Western manufacturers for this segment.

However, a head-start alone doesn’t guarantee that Chinese companies will succeed with VR, especially in Western markets. That’s in part because the Chinese consumer electronics industry is not used to being a pioneer for a new technology. Instead, it has traditionally followed in the footsteps of Korean and Western companies. Take Xiaomi, for example. The hardware upstart seemingly came out of nowhere six years ago, and has since become one of the world’s largest phone manufacturers, thanks in part due to the fact that it is making devices that look suspiciously like iPhones, but sell for half the price.

Dlodlo didn’t actually demonstrate its VR Glass device at CES Asia, but plans to introduce it to the world with an event in New York later this year. The company wants to sell the device worldwide for around $500 to $600.
Janko Roettgers / Variety

To be fair, there are many instances of Western and Korean companies liberally borrowing from each other’s ideas as well. But taking the most successful aspects of other products, and then improving them for their own customer base, has long been key to the Chinese consumer electronics industry. That’s not possible in VR, where few Western companies have actually released products, and most features and concepts remain unproven. “If we want to innovate, we have no experience to borrow from,” said Jie. “We are pioneers.”

Another challenge for Chinese VR companies will be software and user interface design. The country’s consumer electronics industry often emphasises hardware development over software and services, resulting in interfaces that don’t translate well for international markets, or simply aren’t user-friendly.

Case in point: Most Chinese TV manufacturers use small variations of the same Android-based TV interface for their products. These companies often have to take radical steps to truly innovate. Market leader Hisense for example decided to outsource its TV interface design to a Canada-based subsidiary a few years back in order to build products that could compete with companies like Samsung.

Chinese VR companies may have to do the same thing, and break with traditions to innovate on interface design and services in order to take on heavyweights like Oculus and Samsung. What’s more, they may have to actually develop their own vision for what VR will be, and how consumers will use it. Said Jie: “We are at the same pace with foreign competitors. That’s why the market positioning is really important for us.”

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