Why the US Should Pay Attention to VR in China

via Will Shumate

With its numerous applications, VR could be one of the next technologies to alter the world we live in. It is going to matter who “wins” this technology, and while the US has an early lead in VR, there are a few reasons to worry.

First, VR receives the personal attention of Xi Jinping including multiple photo ops at VR facilities and other public appearances.  In a country hyper focused on Xi, his attention sends a strong signal that VR is a priority.  This ensures that investment in VR—and public interest—will continue to increase.  Even more importantly, this attention has translated to the establishment of two public-private strategic industry partnerships and the inclusion of VR in notable policy initiatives such as Made in China 2025 and the 13th Five Year Plan.

Another advantage is that China has a large domestic market which allows for increased demand for headsets.  This advantage is compounded by China’s ability to achieve widespread adoption by selling headsets for prices as low as $17 USD and putting VR arcades all over the country. 

The third advantage is China’s system for organizing its industrial base.  China has come up with a concept called a “VR Town” (or alternatively “VR City”), which is split into two parts.  The first is that each town will have a multitude of VR applications in a variety of fields (medical, education, business, design, entertainment, etc.).  The second is that VR Towns will contain industrial parks which help connect important elements of the supply chain of VR with shorter more efficiently organized links.  The advantage of organizing supply chains in this manner cannot be overstated.  It is an effective way to catch up–and even surpass—the US in some industries.  One example of an industry where this was effective is the commercial drone industry, in which China-based Da Jiang Innovations now holds over 70% of the global market.  They crushed their US-based competition (3D Robotics) using this strategy. The trick DJI used is to design industrial parks so that multiple components of the supply chain are collocated, particularly those that would normally come from distant and disparate locations.  When this is done correctly, a prototype in the US that takes two weeks to make can be turned around in a single day in the Pearl River Delta (this is where Shenzhen–the capital of China’s attempt to optimize technology supply chains—is).  That reduction in turn provides a 50% to 60% cost advantage when it comes to manufacturing components.  This is a lethal combination for competitors, as it allows China to produce products with more innovative features at a faster rate and a lower cost than the US.  The VR industrial parks China is setting up are intended to be utilized in the same way, and it seems logical that without a response from the US it could allow China to gain a lead in VR, much in the way they did in the drone industry.

The US needs to be on the lookout for China’s attempts to organize supply chains in competitive industries, and VR is no different.  While some might not find competition in this industry very concerning given that the most obvious implications are in the entertainment industry, they are missing the multitude of applications for VR in healthcare, education, business, design, warfighting, and numerous other training and learning scenarios.  VR has become a critical technology in China’s plans for the future, and if the US is going to compete with China in the long run it is time to get more aggressive in their approach to competition in this industry.

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