元宇宙时代：投资于交付、基础架构和内容(英)-汇丰-2021.1

                    Disruptive Technology
Equities
Global

Thematic research
December 2021

By: Davey Jose, Frank Lee, Nicolas Cote-Colisson and Frank He (S1700517120005)

www.research.hsbc.com

SPOTLIGHT

The Metaverse Age
Investing in delivery, infrastructure and content
There are three major investable
areas for the emerging metaverse:
delivery (headsets), infrastructure
and content
We present stocks listed in Asia,
Europe and the US that our equity
analysts believe could ride the wave
of this disruptive technology…
…and detail the regulatory
landscape, ESG implications and
our HSBC Disruption Framework

Disclosures & Disclaimer: This report must be read with the disclosures and the analyst certifications in
the Disclosure appendix, and with the Disclaimer, which forms part of it.

                    Disruptive Technology ● Equities
December 2021

CIO tearsheet

Building the metaverse has
started



There are three major investable areas for the emerging metaverse:
delivery (headsets), infrastructure and content



We present stocks listed in Asia, Europe and the US that our equity
analysts believe could ride the wave of this disruptive technology…



…and detail the regulatory landscape, ESG implications and our
HSBC Disruption Framework

Our core belief is virtual and augmented reality technology, which transports users to the world
of the metaverse, could become the next mass computing platform like the PC and smartphone
before it. But it will take time. We expect Facebook (now Meta Platforms) to be a significant
contributor to the metaverse, a bit like Google to the Internet, but it can’t build the metaverse
alone. What’s needed is a combination of leading hardware and software companies. We don’t
see the metaverse being a major part of earnings in the near term, and make no changes to our
earnings or forecasts, but we believe it can become a major driver over the long term.
In this report we talk through the various metaverse experiences and related technologies (such
as quantum computing), explore the regulatory landscape and ESG implications, and detail
where the metaverse lies in our HSBC Disruption Framework. But our focus is where to invest:

Headsets will be one way to
enter the metaverse

Servers and datacentres will
be the infrastructure for the
metaverse

Content is key for the
metaverse

Delivery (p.15 for companies): We list 13 companies that make all the processors, displays,
optics and sensors for headsets. These include 12 stocks covered by HSBC analysts, among
them Goertek, which makes lenses and display modules for headsets such as Facebook’s
Oculus Quest 21, Will Semi, which makes camera sensors, and TSMC, which manufactures the
all-important semiconductor chips
Infrastructure (p.16 for companies): We list 12 companies that focus on servers and
datacentres, providing the infrastructure to power the metaverse. Our list of profiled companies
covered by HSBC analysts includes 7 Buys, among which Hon Hai, which makes equipment for
the three large US cloud service providers (Microsoft, Amazon and Google), and SK Hynix.
Content (see p.17 for companies): We list 16 companies providing digital content and is the
other major investable segment. In terms of the major ecosystem players, among companies
covered by HSBC, we look at Meta Platforms (formerly Facebook) as it’s involved in all the key
metaverse areas from social media to e-commerce, as well as Tencent, which stands out
among other Chinese internet giants for its focus on the digital world, its in-house capabilities
and as it is exploring M&A opportunities. In games, we include Ubisoft and Pearl Abyss,
amongst others. Over in the luxury, fashion and NFT world, we look at Kering and HYBE. And
for virtualisation we take a look at Dassault Systèmes, a worldwide leader in digital twins that is
helping to create a symbiotic relationship between the real world and the metaverse.
This is our latest report on the Disruptive Technology theme. If you want to subscribe to any of
our nine big themes, click here.
______________________________________
1 Recently rebranded as Meta Quest 2

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Disruptive Technology ● Equities
December 2021

What is the metaverse?
VR, AR, video games,
streaming content, digital
goods and beyond

AR – a new reality

Before we get in too deep, let’s back up a bit. What do we mean by the metaverse? We don’t
claim to know everything, and certainly from an investment point of view, we believe it’s very
difficult to know exactly what the metaverse will look like in ten years’ time. One way to describe
it is as a combination of digital, highly immersive and experiential technologies that create virtual
worlds for users, both consumers and enterprises. In this report, we attempt to find ways to help
investors get exposure to what we understand to be structurally important for the metaverse.
First, we break down the metaverse experiences and interfaces as we see them today, and
going forward:


Virtual reality (VR) – Wearing a VR headset puts you into a digitally constructed, threedimensional environment. It takes over your visual field of view through goggles and
headphones, creating the illusion one is elsewhere, through a feeling the industry calls
‘presence’. This is the fullest metaverse experience that technology can provide today. At
the moment VR is through goggle-like devices but in the future they will become glasses
form factor.
Examples: Meta’s Quest 2, PlayStation VR, ByteDance’s PICO VR, HTC’s Flow.

AR – new layer over reality



Augmented reality (AR) – Where digital graphics are overlaid on reality. Today AR can be
accessed on smartphones through filters or through digital objects on the screen. AR
glasses and headsets exist today but are less advanced than VR headsets, due to the
complexity of the optics technology required for AR.
Examples: Apple ARKit, Android ARKit, Facebook SparkAR, Snap filters, Niantec’s
Pokemon Go, Magic Leap AR headset, Microsoft HoloLens headset, Snap glasses, Meta’s
Quest 2 with pass-through mode, Meta’s Ray-Ban glasses.

Gaming and digital content –
early versions of metaverse



Video games and digital streaming content – Interactive games (powered by artificial
intelligence) or other digital content. Video games are smaller scale but early versions of
what Meta’s metaverse ambitions could look like, using persistent worlds with their own
commerce and economies. Professional gaming known as eSports and digital streaming
content providers could also provide content and IP for the metaverse.
Examples: Roblox has 150m+ monthly active users9 (Nike recently announced a partnership
with Roblox to create Nikeland within the game world), Minecraft has 140m+ users10, Fortnite
has 80m monthly active users11, Disney, Netflix, Amazon Prime Video, Spotify.


Goods and money in
metaverse

Digital goods, crypto and NFTs (Non-Fungible Tokens) – Digital goods have been the
mainstay of video games for many years, with users buying items like avatars, skins and
other virtual goods with virtual money. But this money is typically only able to be spent
within the closed metaverses. The development of cryptocurrencies and NFTs holds the
potential for a wider metaverse commerce, across different platforms and the wider real
world economy outside the metaverse.
Examples: Robux is in-game money in Roblox, Minecoins within Minecraft, V-Bucks in
Fortnite. The total market cap of 10,000 cryptocurrencies like Bitcoin and Ethereum reached
USD2.8trn recently.12 Nike recently trademarked its various brands and slogans to sell
virtual sneakers and apparel. Digital collectables through NBA#s Top Shot NFT
marketplace.13

______________________________________
9 Business of Apps 2021
10 Microsoft 2021
11 Business of Apps 2020
12 “Crypto rally: total market cap hits all-time high of USD2.8T”, Financial Express, November 2021.
13 "Nike is quietly preparing for the Metaverse", CNBC, Nov 2021

10

                    Disruptive Technology ● Equities
December 2021

ESG and other potential issues for the metaverse

We see at least the same
level of scrutiny from
authorities

Regulation and interoperability
The new playing field of big tech may create new concerns from regulators and authorities. So
far, the metaverse has been essentially articulated around gaming platforms, running their own
digital environments, not requiring much attention, in our view. But the ambition set for the
metaverse, whether from Meta Platforms, Tencent or Microsoft to name a few, is much larger.
If the metaverse eventually gets the traction that Big Techs expect, this will concern not only
gaming, but also social interactions, e-commerce, collaborative work and entertainment, to
quote a few area of activities.
Regulators around the world have tried in recent years to limit the influence of the large tech
companies that also happen to have the financial power to finance massively the development
of the metaverse. In its Proposal for a regulation of the digital sector (Digital Market Act, 15
December 2020), the European Commission (EC) indicates that the large platforms exploiting
core services have the following characteristics:

Considerable economic power

Interoperability: risk and
opportunity



Extreme scale economies: with nearly no marginal cost to add a user, the incumbent can
gain a significant competitive advantage that cannot be won back by a competitor



Networks externalities and network effects (Metcalf’s Law): the more users, the more
efficient the service, so a new competitor with a lower price or a better privacy policy will
find hard to gain scale (lock-in, vertical integration, etc)

The EC adds that such characteristics, if combined with unfair conducts by platforms, can
impact the fairness of the market place. The EC also explains that a small number of large
suppliers have emerged with “considerable economic power, leveraging their access to large
amounts of data from one area of their activities to new ones”. Given the high barriers to entry to
replicate the existing ecosystems, the EC is concerned that these characteristics could lead to
unfair practices and conditions for businesses and end-users. The EC therefore proposes to
introduce the definition of gatekeepers to which specific regulatory safeguards should be
applied. Amongst the Do’s and Don’ts that the EC wants to impose, we found the notion of interoperability: gatekeepers will have to “allow third parties to inter-operate with the gatekeeper’s
own services in certain specific situations”. To be deemed as a gatekeeper, the EC requires the
cumulative criteria of a European revenue above EUR6.5bn, more than 45m active monthly
users and an “expected entrenched and durable position”, measured as the two first criteria
have been met in the last three financial years.
We see interoperability as a risk to platforms’ current (siloed) business, but an opportunity for
more competition in the metaverse. Would Facebook (the social network), for example, be able
to retain its users and their engagement if data portability and interoperability were enforced?
Portability and interoperability are highly technical and complex, but this has already been
undertaken in the highly sensitive banking sector. But Mark Zuckerberg is calling for
interoperability in the metaverse (Facebook Connect 2021 keynote speech, 28 October 2021).
Mr Zuckerberg insists on the necessity for standardisation and interoperability. Given its size
(1.93bn daily users, 2.91bn monthly users) and its driving force in a key piece of the metaverse
ecosystem (VR headsets), what Meta Platforms is calling for has to be considered seriously.
In an interview (Stratechery, 28 October 2021), Mr Zuckerberg gave more indication of the need
for interoperability and collaboration: “you wouldn’t say that Facebook or Google are building
their own Internet and I don’t think in the future it will make sense to say that we are building our
own metaverse either. I think we’re each building different infrastructure and components that
go towards hopefully helping to build this out overall and I think that those pieces will need to
work together in some ways”. He is also calling for “some sets of open standards where things
are interoperable”.

12

                    Disruptive Technology ● Equities
December 2021



Building in privacy and safety from day one as well as
interoperability, open standards
Mark Zuckerberg, Meta CEO on the metaverse (Oct 2021)

Metaverse to be open… to
limit intervention from
authorities?

You check Facebook many
times a day but will you live
in the metaverse?

Meta Platforms and other tech giants still carry the burden of their scale and the level of influence
that they can have on public opinion. Claiming from the outset that the metaverse will be open is,
in our view, a kind of white flag to limit intervention from authorities, especially when Meta
Platforms predicts that the metaverse will be the place where people will live, work and play.
Given the large potential of the metaverse, we expect at least even more scrutiny from authorities
(in the form of additional regulation). For the larger players, we see interoperability as having the
potential to reduce the barriers to entry and to trigger more competition in the long run.
Health and safety and social
Defining how the metaverse will influence our societies in the long run is about as difficult as
guessing correctly on how the internet and communications technologies (including mobile) would
influence our world today back in 1990. If someone had predicted that we would spend hours a
day on a small screen even when walking around, they would have warned the world for a
forthcoming dystopia. So we would refrain from calling another dystopia with the metaverse. But
we think it is worth sharing some views from Oculus (VR business of Facebook/Meta Platforms)
executive Jason Rubin, in an email sent to Facebook board member Marc Andreessen, titled “The
Metaverse” in June 2018 and quoted by CNBC (30 October 2021).



If delivering the Metaverse we set out doesn’t scare the
living hell out of us, then it is not the Metaverse we should
be building
Jason Rubin, Facebook/Meta Platforms executive (June 2018)

As already said, given the driving force of then Facebook and now Meta Platforms in shaping
the metaverse, what their managers are calling for has to be considered seriously. Mr Rubin’s
view is that “[he] might check in to Facebook multiple times a day, but [he] will LIVE in the
Metaverse, work in the Metaverse, and potentially prefer [his] time in the Metaverse to [his] dayto-day grind”. If human activity turns essentially digital, in a fully immersive environment, we
would expect some philosophical debates about its acceptance. After all, what we have seen in
mainland China for the gaming and education industry might give an indication of what the
metaverse could risk.

China regulations and
metaverse implications

Mainland China relations: what does it mean for the metaverse?
Protecting minors against online game addiction via setting limits on time and money spent has
been an ongoing and escalated effort from the Chinese government. This could affect the
participation of minors in the metaverse. However, National Press and Publication Administration
also explained that minors can still access online games at a moderate rate given the benefits it
bring for example, learning how to code, play chess and sports are still encouraged.
Also, we believe the Chinese government is supportive of the technology behind the development
of the metaverse, as innovations like 5G, AI, AR and VR are key industries highlighted by the
government in its 14th five-year plan and will enable the metaverse, as long as the user experience
stays within and is in compliant with the mainland China regulatory framework.

13

                    Disruptive Technology ● Equities
December 2021

Stocks that enable the metaverse today
Delivery: Which companies make metaverse headsets?
Company
1. Goertek
2. Sunny Optical
3. Will Semi

4. BOE Technology
5. TSMC
6. Win Semi

7.

LandMark

8. Largan
9. Samsung Electronics
10. SK Hynix
11. LG Display
12. LG Innotek
13. Qualcomm

Ticker
Rating CMP/TP
002241 CH Buy
CNY52.09/
CNY69.50
2382 HK
603501 CH

000725 CH
2330 TT
3105 TT
3081 TT
3008 TT
005930 KS
000660 KS
034220 KS
011070 KS
QCOM US

Buy
Buy

Buy
Buy
Buy
Buy
Hold
Buy
Buy

Headset supply chain
Assembly of headsets and magnifying optics (Fresnel lens and
pancake optics). Fresnel 22m units in 2021e to 321m units in
2030e. TAM USD1.9bn. CAGR c32%
HKD232.40/ Magnifying optics, camera lens and modules
HKD269.50
CNY266.95/ Camera sensor (miniaturised eye tracking and vSLAM). Good
CNY427.40 relationship with headset vendors. Ordinary cameras 38m in 2021e
rising to 1.04bn units in 2030e. TAM 114m in 2021e to USD2.1bn in
2030e. IR camera CAGR c133%. TAM USD1m in 2021e to
USD1.67bn in 2030e.
CNY4.88/
Display panel: Fast-LCD with 11m units in 2021e to 137m units in
CNY6.90
2030e, TAM USD6bn and CAGR c31%. micro-OLED with 120k
units in 2021e to 61m units in 2030e. TAM USD5.2bn. CAGR c94%
TWD600/
Semis directly used in headsets for application processor and
TWD730
camera sensor in supply chain (eg. Qualcomm/Will Semi, both
TSMC customers).
TWD358/
Largest GaAs open-market foundry (70% market share) - wireless
TWD470
headset connectivity will be key. Advanced 3D sensing like VCSELs
for future headsets.
TWD199/
Likely long wavelength sensors for eye tracking, foveated rendering
TWD280
(uses eye tracking in VR to reduce rendering processing in
peripheral vision) and biometric recognition.
TWD2,000/ Lenses for optics, eye-tracking cameras, positional tracking and
TWD2,000 time-of-flight sensors.
KRW74,400/ Key supplier for display (OLED/micro-LED), memory and system IC
KRW96,000 and indirect foundry to other semi component suppliers. Invested in
smart glass tech.
KRW116,500/ Key supplier for memory, both DRAM and NAND flash
KRW140,000

Buy

KRW20,250/ Key display supplier. Future display tech for OLEDoS KRW30,000 thinner/lighter headsets, better colours, resolution and response.

Buy

KRW314,000/ 3D sensors and cameras. Camera module supplier for Oculus.
KRW370,000

NR

USD175.63/ Application processor: 90-95% expected of VR SoCs (eg
Snapdragon XR2)
-

_____ Headset components ______
Display Optics Sensors Processors






























Source: Company data, HSBC estimates. NR = not rated by HSBC. Priced at close on 1 December 2021

15

Disruptive Technology ● Equities
December 2021

Infrastructure: Which companies are powering the metaverse through datacentre infrastructure?

1.

Company
ABB

2.

Legrand

3.

Schneider Electric

4.

Siemens AG

5.

Aspeed

6.

Hon Hai

7.

8.

9.

Wiwynn

Quanta

TSMC

10. LandMark
11. Samsung Electronics
12. SK Hynix

Ticker
Rating
ABBN SW Buy

CMP/TP
CHF32.28/
CHF38.0
EUR98.70/
EUR90.0

Datacentres
Strong demand for datacentres within electrification
business area
Datacentres double-digit growth over last two years

LR FP

Hold

SU FP

Hold

EUR162.76/
EUR165.0

Datacentres and networks grew double-digit in Q3
despite supply chain issues

SIE GR

Buy

EUR148.02/
EUR190.0

Smart infrastructure and datacentre shows healthy
momentum

5274 TT

Buy

TWD3,255/
TWD3,000

2317 TT

Buy

6669 TT

2382 TT

Buy

2330 TT

Buy

3081 TT

Buy

005930 KS Buy
000660 KS Buy

Has c94% exposure to BMC (Baseboard Management
Controller) in 2021. 70% revenue exposure to cloud servers
(vs industry's 40% in 2022e). Cupola 360 image processor
SoC to and in-camera tech for 360-degree apps.
Original design manufacturer for 3 large US cloud service
TWD105.5/
providers - Microsoft, Amazon and Google, who have
TWD155
ventured into 3D technologies, and thus ripe for
metaverse applications. Cloud and networking is c23% of
revenues in 2021e and expect to grow to 27% in 2023e.
Makes advanced consumer electronics and is a positive
to gain from future opportunities in AR/VR.
Cloud computer infrastructure hardware provider for
TWD1,020/
cloud services, with 100% revenue exposure to
TWD1,100
datacentres. Facebook and Microsoft, accounted for 44%
and 29% of its revenues in 2021e, and can gain from
metaverse trends.
Most advanced ODM in supply chain with ability to
TWD87.90/
develop AI-servers that adopt GPU/ASIC/FPGAs.
TWD110
Invested in Israeli AR company Lumus in 2016.
Collaboration with STMicroelectronics on reference
design for AR glasses.
Foundry to AMD, Nvidia and Qualcomm, which provide
TWD600/
GPUs and CPUs. AMD already has deal with Facebook
TWD730
to supply its datacentre chips.
Largest application for indium phosphide is the lasers and
TWD199/
photodetectors in transceivers that are used in
TWD280
datacentres
KRW74,400/ One of the key foundry partners to CPU and GPU with
KRW96,000 sales of system LSI division to grow by 17% CAGR
during 2020a-2023e as well as memory supplier to CSPs
KRW116,500/ Key supplier for memory, both DRAM and NAND flash
KRW140,000

Source: Company data, HSBC estimates. Priced at close on 1 December 2021

16

___ Metaverse Cloud Service Providers __
Facebook Amazon Microsoft Google



Disruptive Technology ● Equities
December 2021

Content: Which companies make digital content, software and services for the metaverse?
____________ Types of metaverse ____________

Company
1. Meta
Platforms
2. Tencent

Ticker
FB US

Rating
Hold

700 HK

Buy

3. Alibaba

BABA US Buy

4. Baidu

BIDU US

Buy

5. ByteDance

-

NR

6. Dassault
Systèmes

DSY FP

Hold

7. Ubisoft

UBI FP

Buy

8. CD Projekt

CDR PW

Hold

9. Embracer

EMBRACB Buy
SS

10. Stillfront

SF SS

Hold

11. Team17

TM17 LN

Buy

12. Pearl Abyss 263750 KS Buy
13. Perfect World 002624 CH Buy
14. Mango
Excellent
Media

300413 CH Buy

15. Kering

KER FP

16. HYBE

352820 KS Buy

Buy

Social Gaming Enterprise Commerce Hardware
Software
Oculus Quest and Rift app store, with social, gaming and enterprise





apps. Sells VR hardware.
Virtual CGI humans with voice, used for live streaming, teaching,
assistants and tour guide powered by Tencent cloud. Virtual
presence tech using voice in game engine. Identity and social



network. Investments in VR music concert operators and movie
company. 40% stake in EPIC games, owns Riot Games and
Supercell 51% stake
USD122.49/ Online VR shopping portal in Taobao. Investment in AR company
USD190
Magic Leap. Registered trademarks for "Ali Metaverse", "Taobao


Metaverse" and "DingDing Metaverse". Established VR equipment
company in 2021.
USD148.83/ Investment in volumetic video company 8i in 2017. Subsidiary iQiyi
USD195
released VR device in 2020. Registered trademark "metaapp" for


future developments.
Acquired PICO in 2021, third biggest VR headset maker globally.
Incubating metaverse social platform - Pixsoul. Invested in Chinese 


version of Roblox in 2021.
EUR53.68/ Offers persistent virtual collaboration spaces with its 3DExperience
EUR50.0
platform, including Catia and Solidworks. Group TAM USD100bn.
Metaverse digital twins complementary for collaborating in 3D

spaces: from 3D model, CAD, sensors, cloud, connectivity, to
VR/AR.
EUR42.53/ Potential to leverage its titles such as Assassin's Creed, Far Cry

EUR75
and The Division in VR.
PLN185.0/ Potential to leverage their titles like Cyberpunk 2077 and The

PLN180
Witcher.
SEK96.39/ One of its gaming studios Vertigo Studios develops VR focused
SEK150
games. The games developed include multiplayer elements, social

interaction with friends and others.
SEK50.20/ Potential to leverage its casual and hyper casual games in social

SEK65
interaction-based metaverse.
668p/
Potential to leverage its titles like Worms.

990p
KRW127,700/ Game developer for "Black Desert IP". Launching its first
KRW195,000 metaverse game DokeV in 2023e. Potential to connect with


multiverse games and NFTs.
RMB18.92/ Leading game developer in mainland China. Plans to move into
RMB23.80 metaverse through VR. Has MMORPG and open-world game 
owns 24% market share.
RMB43.85/ Creates virtual hosts using AI and motion capture. Mango TB used
RMB85.80 5G and VR tech for a TV show to give viewers immersive




experience. Launched AR interactive group photo system.
Launched NFTs in 2021.
EUR705.10/ Early entrant in luxury groups in metaverse ecosystem with virtual

EUR850.00 clothes, accessories, NFTs, etc.
KRW352,500/ Fast growing entertainment company in Korea, popular for
KRW500,000 managing BTS. Plans to expand Boundless business in 2022



focusing on NFT, games, webtoon & web novels, etc.

CMP/TP
USD310.39/
USD300
HKD468.80/
HKD590

Source: Company data, HSBC estimates. NR = not rtaed by HSBC. Priced at 1 December 2021, except for Meta Platforms on 2 December 2021

17

                    Disruptive Technology ● Equities
December 2021

Delivery stocks


VR/AR headsets are one of the major investable metaverse areas



Processors, displays, optics, and cameras are the key components
while chip makers straddle headsets and datacentres (next chapter)



We profile the major headset and chip suppliers including Goertek,
Sunny Optical, Will Semi, BOE, TSMC, Win Semi, LandMark,
Largan, Samsung Electronics, LG Display and LG Innotek

Metaverse hardware via headsets
Frank Lee*
Head of Technology Research, Asia
The Hongkong and Shanghai
Banking Corporation Limited
frank.lee@hsbc.com.hk
+852 2996 6916
* Employed by a non-US affiliate of HSBC
Securities (USA) Inc, and is not registered/
qualified pursuant to FINRA regulations

We believe there are two are major metaverse verticals related to tech hardware. This chapter
focuses on the VR/AR headset supply chain and the next chapter on the server and datacentre
ecosystem. Given the strong success of Facebook’s (re-named Meta Platforms) Oculus VR
headset released in October 2020 with a retail ASP of USD299 for its entry 64GB model, we
believe the VR/AR headset is finally at a point where cost is at a reasonable level for demand to
start to pick up and gain traction.
We also see opportunities for semiconductor chip vendors such as Nvidia and AMD to provide
the high-end process processing power via its GPUs and CPUs necessary for the cloud service
providers (CSPs). Therefore, we see investment opportunities in both the VR/AR headset
hardware suppliers and the server and datacentre supply chain across HSBC’s tech team
coverage universe listed in our tables below. For the sake of simplicity, we put chip makers in
this chapter even though they straddle both headsets and datacentres.

Frank He* (Reg no:
S1700517120005)
Head of A-share Technology
Hardware Research
HSBC Qianhai Securities Limited
frank.fang.he@hsbcqh.com.cn
+86 21 6081 3809

Snow Crash – science fiction to reality for VR/AR headsets

Steven Wang* (Reg no:
S1700121030003)
Associate
Shenzhen

The word “metaverse” is often traced to a cyberpunk novel “Snow Crash” published in 1992, which
conveys a concept of a future iteration of the internet and depicts a virtual shared space that includes
virtual worlds, virtual avatars, and virtual reality. A metaverse is promised to interweave our digital
and physical lives in socialization, working, studying and amusement, in which case, virtual reality is
well positioned. After many false starts since 2016, virtual reality is finally taking off as headsets are
getting better, prices are falling and the content ecosystem is taking shape.

* Employed by a non-US affiliate of HSBC
Securities (USA) Inc, and is not registered/
qualified pursuant to FINRA regulations

Processors, displays, optics and cameras
On the hardware side, we identify four major areas where we see promising opportunities for
major supply chain:

18

1.

Application processors. We expect Qualcomm to dominate this market with c90-95% shares,
as the launch of Qualcomm’s Snapdragon XR2 has reshaped the competitive landscape for VR
SoCs thanks to its exceptional processing capabilities, which were well ahead of its rivals.

2.

Display panels. We view BOE and LG Display as potential beneficiaries by leveraging
their strengths in manufacturing integration of fast-LCD and micro-OLED.

                    Disruptive Technology ● Equities
December 2021

For fast-LCD, we forecast annual shipments of fast-LCD display panels used in VR and VRtype MR headsets to surge from 11m units in 2021 to 137m units in 2030. We expect the total
addressable market to hit USD6.1bn in 2030, equivalent to a CAGR of c31% in 2021-30.

Total addressable market of fast LCD
Fast-LCD for VR/VR-type MR
Fast LCD shipment (m units)
ASP (USD)
Market size (USDm)

2021e
11
49
547

2022e
16
48
775

2023e
21
48
988

2024e
29
47
1,374

2025e
41
47
1,923

2026e
55
46
2,524

2027e
71
46
3,224

2028e
94
45
4,247

2029e
115
45
5,143

2030e
137
44
6,069

Source: Company data, HSBC Qianhai Securities estimates

For micro-OLED, we forecast annual shipments of micro-OLED adopted in VR, AR and
MR to surge from 120k units in 2021 to 61m units in 2030. We expect the total addressable
market to hit USD5.2bn in 2030, registering a CAGR of c94% in 2021-30.

Total addressable market of micro-OLED
Micro-OLED for VR, AR and MR
Micro-OLED shipment (m units)
ASP (USD)
Market size (USDm)

2021e
0.12
108
13

2022e
1
103
91

2023e
6
99
598

2024e
15
96
1,414

2025e
21
94
2,005

2026e
30
92
2,739

2027e
36
90
3,221

2028e
43
88
3,788

2029e
51
87
4,455

2030e
61
85
5,151

Source: Company data, HSBC Qianhai Securities estimates

3.

Magnifying optics. We favour Goertek and Sunny Optical based on their leading positions
in Fresnel lens and pancake folding optics design. We forecast annual shipments of
Fresnel lenses adopted in VR and VR-type MR headsets will surge from 22m units in 2021
to 321m units in 2030. We anticipate the total addressable market to hit USD1.9bn in 2030,
registering a CAGR of c32% in 2021-30.

Total addressable market of Fresnel lens in VR and VR-type MR
Fresnel lens for VR/VR-type MR
Fresnel shipment (m units)
ASP (USD)
Market size (USDm)

2021e
22
8
156

2022e
31
8
222

2023e
44
8
305

2024e
63
8
430

2025e
91
7
602

2026e
122
7
793

2027e
159
7
1,015

2028e
214
7
1,340

2029e
266
7
1,627

2030e
321
7
1,925

Source: Company data, HSBC Qianhai Securities estimates

4.

Cameras. We highlight Sunny Optical for its camera lens and module and Will Semi for
camera sensors (especially for miniaturised eye-tracking cameras) owing to their solid
industry know-how and strong relationships with VR headset vendors. There are two main
functions for cameras used in VR headsets: virtual simultaneous localisation and mapping
technology (vSLAM) and eye-tracking.
In vSLAM, VR vendors prefer to adopt ordinary cameras, unlike AR vendors, as the
precision level of positional tracking can materially affect the immersive experience. By
factoring in some pure film-watching VR headsets for which SLAM is not necessary, such
as DPVR and Xiaomi’s VR Play, we forecast that ordinary camera shipments for VR
headsets will increase from about 38m units in 2021 to about 1.04bn units in 2030, with the
total market size expanding from USD114m in 2021 to USD2.1bn in 2030.

Shipment and market size forecasts for SLAM cameras in VR
Ordinary camera
Shipments (m units)
Market size (USDm)

2021e
38
114

2022e
57
157

2023e
85
221

2024e
130
321

2025e
201
480

2026e
291
676

2027e
411
925

2028e
598
1,305

2029e
801
1,694

2030e
1,044
2,143

Source: Company data, HSBC Qianhai Securities estimates

19

元宇宙时代：投资于交付、基础架构和内容(英)-汇丰-2021.12-74页.pdf.pdf