China establishes formal virtual reality industry alliance

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China's virtual reality (VR) market was worth 1.54 billion yuan ($239 million) in 2015 and is expected to be well over 5 billion yuan this year. A number of developments in the world’s second largest economy is pointing to the role planned for VR technology in the Chinese economy.

Government, industry and institutions are moving to formalize the emerging VR industry in China and large, established companies are increasingly changing their business strategies to include VR. Last year, the internet giant, Tencent announced its VR strategy which involves the miniStation game console, apps for gaming, movies and live-streamed events and the development of its own virtual reality game. A VR cinema for joining friends to watch movies is also planned.

Lenovo, the world's largest personal computer maker, has also announced that it is restructuring to be able to incorporate VR and other emerging technologies in order to stay competitive. Lenovo’s new PC & Smart Device Business Group will add to its responsibilities the development of augmented reality and virtual reality products.

Then there is the world’s fifth largest smartphone maker, Xiaomi. Xiaomi announced in January this year that it is expanding its portfolio to include virtual reality and robotics.

In March this year, Chinese e-commerce giant Alibaba announced that it is planning its own VR research lab, dubbed GnomeMagic Lab. Alibaba had already shown its colours when in February this year it was the lead investor in a Series C round of $793.5 million in AR startup Magic Leap.

Even before Alibaba’s announcement, Chinese online video provider LeTV Holdings Co Ltd launched its first ever virtual reality headset to drive mass adoption of VR in China. The company said it is also working to bring VR movies, video games, education and sports broadcasting services to its users in the coming years.

Many of China’s TV producers are under pressure due to competition from internet companies. The China Daily reports this week that earnings in the TV and smartphone industries fell 14.33% and 50.2% respectively. Traditional home appliance makers are also experiencing increased competition from Internet companies and this market is also changing.

In order to survive, these companies are looking for new sources of profits and are seeking to get involved in other market segments, amongst them the medical industry, intelligent manufacturing, and VR.

Earlier this month, on 9 April, at the fourth China Electronic Information Expo in Shenzhen, all these factors culminated in the formation of a special body focused on VR. At this event, the Virtual Reality Industry Development Forum was held where more than 100 companies and institutions came together to formally establish the Virtual Reality Industry Alliance. Huawei, MediaTek, Changhong and Riyadh is said to be among the first members.

The establishment of the alliance will benefit the VR industry in China which at this time is still very fragmented.