How is the Current Tech Crisis Affecting the XR Market? 

The impact of tech issues on extended reality

How is the Current Tech Crisis Affecting the XR Market
Mixed RealityInsights

Published: March 23, 2023

Rebekah Carter

Rebekah Carter

The tech industry hasn’t had an easy time in the last couple of years. While it’s fair to say transformation and innovation has been increasing at an accelerated rate since the pandemic, supply chain issues, industry regulations, and other concerns have left a storm cloud over the landscape.  

In the last year alone, valuations for some of the world’s leading companies have declined, startups have shut their doors permanently, and layoffs have become increasingly commonplace. With so much chaos to contend with, it’s difficult to predict what might come next.  

The reality is the tech crisis is having a significant impact on the development of the extended reality landscape, as well as many accompanying innovations. But just how severe is the problem? 

Lost Revenue is Leading to Massive Layoffs 

According to some journalists, the tech space is going through something of a “midlife crisis”. Endless expenses are making the barrier to entry in this world greater than ever, from rising energy costs to inflation, cost of living problems, and even supply chain issues.  

Unfortunately, when companies start losing revenue and value, this trend to be reflected in the way they handle their staff. Leading organizations like Meta, Google, and Apple have all reported significant layoffs in the last year. Alphabet, Google’s parent company eliminated around 12,000 employees in January 2023 based on “economic reasons”.  

In November 2022, Meta also let go of 11,000 employees, reducing its workforce by about 11%. The company also initiated a hiring freeze, to prevent bringing new team members on board during 2023.  

As companies continue to cut down on their employees, the opportunity for innovation is deteriorating as a result. Apple has delayed its strategy for AR and MR glasses, to somewhere around 2026. Meta seems to be making very few leaps in the metaverse space, and Google still hasn’t made any major updates to its own XR initiative.  

Reliance on AI and Automation is Growing 

With budgets dropping, companies appear to be relying more heavily on AI and automation to fill the gaps in their talent base. Although many organizations are investing in hybrid and remote working policies for team members to try and keep hiring costs low, studies indicate the human employee landscape may struggle in the years ahead.  

According to Capgemini, while 65% of companies plan on investing in hybrid working strategies, 39% are reducing investment in critical areas like employee experience and reskilling. To make up for these losses, we could see a more significant investment in using AI and automated tools to help create the next generation of XR experiences.  

After all, in the last year, there has been an increase in the number of low-code, no-code solutions and startups emerging in the market to make automation more accessible to the masses. Additionally, funding has increased for generative AI companies, providing creators with more opportunities to produce content and experiences using AI. Even NVIDIA has its own generative AI strategy to help streamline the production of metaverse experiences.  

Notably, while generative AI solutions might help to accelerate the production of some XR content, it’s likely companies will still need to invest in human talent to take the next step in the XR landscape. Many of the solutions available on the market today are impressive but limited. Solutions like OpenAI’s ChatGPT still suffer from bias issues and knowledge gaps.  

Innovation will Continue in the Supply Chain 

Perhaps one of the biggest ways the XR landscape is suffering as a result of the tech crisis is through a lack of access to critical tools and equipment. The Capgemini study above found 89% of businesses consider supply chain issues to be the biggest risk for growth in the next 18 months. Not to mention brands also have a range of other issues to face, such as energy crises and rising material prices.  

Companies will need to transform the supply chain on a fundamental level to continue innovating and delivering new XR experiences, such as AI contact lenses, MR headsets, and advanced VR solutions. We may see more companies investing in onshoring and nearshoring solutions to bring production bases closer to their target audience. Diversification may also occur on a greater scale from a manufacturing perspective.  

Additionally, just as AI is helping companies to address some of the major issues caused by talent shortages and layoffs, it could also have a role to play in the supply chain. Google Cloud has already introduced various AI solutions to help retailers and developers improve inventory accuracy and enhance their bottom line. Microsoft has also introduced various managed databases to assist with tracking data across the logistics landscape in real time.  

Some companies looking to bridge the gaps in their supply chain may even consider merger and acquisition strategies. We may see more businesses joining forces to put their combined resources together to create new, more advanced experiences.  

Is There Still Hope for the XR Market? 

It’s no secret that the XR market has its fair share of challenges to overcome during the latest tech industry crisis. Like all technology ecosystems, the XR space is subject to the same concerns around supply chains, logistics, rising inflation, and talent shortages. However, this disruption could also be a positive thing for some major companies.  

The shakeup of the tech sector could push companies to think more carefully about how they can accelerate their innovation strategies and create new products at speed. Brands will be under more pressure to innovate, and consumers in the enterprise world could begin investing more heavily in XR as a way to reduce costs and address goals like sustainability and enhancing customer experience.  

The XR brands that continue to innovate in this difficult time could become a core part of other business strategies for growth and acceleration. After all, XR can potentially improve collaboration, speed product development, and even enhance training.

The companies that survive the crisis could have some amazing years ahead.  


AIChatGPTGenerative AIImmersive Collaboration

Share This Post