In September 2022, Meta and Qualcomm made waves in the tech world by announcing a multi-year partnership to develop custom chips for virtual reality (VR) and augmented reality (AR) devices. The collaboration represents a major strategic bet by both companies on the metaverse, a catch-all term for immersive virtual worlds that many see as the next evolution of the internet.
For Meta, formerly known as Facebook, the deal is the latest move in CEO Mark Zuckerberg‘s ambitious plan to pivot the social media giant to a "metaverse-first" company. Meta has already seen strong early traction with its Quest line of VR headsets. But to fully realize its vision of the metaverse as a sprawling digital universe filled with rich experiences, it needs significantly more powerful and efficient semiconductors.
Qualcomm, the leading supplier of mobile chips, views AR and VR as one of its biggest future growth opportunities as the smartphone market matures. The company has steadily expanded its offerings for standalone VR headsets in recent years, with its Snapdragon XR2 chip powering devices like the Meta Quest 2 and Vive Focus 3. By partnering with Meta to create customized silicon, Qualcomm aims to extend its dominance in this emerging space.
Why Custom Silicon is Critical for the Metaverse
To understand the significance of the Meta-Qualcomm deal, it‘s important to recognize just how critical advanced semiconductors will be to bringing the metaverse to life. Today‘s VR headsets and AR glasses are impressive feats of engineering, but they are still fairly limited compared to the ultimate potential of the technology.
"We are still in the early stages of the metaverse, and this sort of deep technical integration will help VR move towards being a multifunctional computing platform," Zuckerberg said in a statement about the Qualcomm partnership.
Truly photorealistic graphics, lifelike haptic feedback, always-on eye tracking and other features needed for convincing virtual experiences will require order-of-magnitude leaps in computing performance and efficiency. Chips that are purpose-built for the specific needs of the metaverse will be essential to enabling those advancements.
Some of the key technical challenges custom silicon could help address include:
- Graphics rendering: Generating high-resolution, physically-based visuals at high frame rates (90fps+)
- Machine learning: Powering sophisticated AI models for avatar animations, NPC interactions, etc.
- Sensor fusion: Processing large amounts of data from multiple cameras, trackers, etc. to map real and virtual environments
- Spatial audio: Rendering realistic 3D sound that reacts naturally to the user‘s head movements
- Connectivity: Seamlessly integrating with edge computing infrastructure to wirelessly stream content
By building chips that are optimized for these VR/AR workloads, Meta and Qualcomm can push the boundaries of what‘s possible and accelerate the development of the metaverse.
"Purpose-built silicon can provide significant advantages in terms of performance, power efficiency, and size compared to general-purpose chips," said Anshel Sag, Principal Analyst at Moor Insights & Strategy. "This is especially true for demanding use cases like VR/AR where every ounce and millimeter matters in the headset design."
An Arms Race Among Tech Giants
Meta‘s deal with Qualcomm comes amid rising competition in the race to develop hardware and software for the metaverse. Several of the company‘s biggest rivals are rumored to be working on their own VR/AR devices and custom silicon to power them.
Apple has long been expected to release a high-end mixed reality headset, potentially powered by a variant of its Arm-based M2 chip. Given the M2‘s industry-leading performance and efficiency, a VR/AR device with that silicon could be a major threat to Meta‘s offerings.
Microsoft already sells the HoloLens 2 AR headset using a custom chip co-developed with Qualcomm. It‘s possible Microsoft could extend this custom approach to chips for future versions of the device or even VR headsets. The company has also unveiled ambitious plans for enterprise metaverse applications through its Microsoft Mesh platform.
Google and other Android players could leverage Qualcomm‘s recently announced Snapdragon AR2 Gen 1 platform for a new wave of sleek AR glasses. However, Qualcomm clarified that its work with Meta is separate from the Snapdragon Spaces initiative.
Meta itself had previously tried to develop custom chips in-house, but the effort produced mixed results. Faced with the daunting costs and complexity of chip design, partnering with Qualcomm became an appealing way to accelerate its hardware roadmap.
"The Meta-Qualcomm agreement is a sign of the intensifying competition among big tech companies to own the hardware foundation of the metaverse," said Leo Gebbie, Principal Analyst of Wearables and XR at CCS Insight. "As the market takes shape, custom silicon that is deeply integrated with software and content ecosystems will become a key battleground."
A New Moore‘s Law for the Metaverse?
More broadly, the deal reflects the growing importance of specialized chips as Moore‘s Law, the famous maxim that the number of transistors on a chip doubles roughly every two years, slows down. With the physical limits of traditional semiconductor scaling in sight, tech companies are increasingly turning to domain-specific architectures to continue driving performance gains.
Apple‘s success with its custom M-series chips for Macs is a prime example of this trend. By optimizing the chip design for its specific software and use cases, Apple has been able to achieve massive improvements in speed and battery life compared to the x86 processors it previously used from Intel.
A similar opportunity exists in VR/AR, where the unique demands of immersive computing cry out for bespoke silicon. Dedicated accelerators for things like computer vision, machine learning, and graphics rendering could provide a major boost over legacy mobile and PC chips.
"Just as smartphones ushered in a new golden age of mobile chip design, the metaverse has the potential to spark a Cambrian explosion of innovation in semiconductor architectures for AR/VR," said Dr. Ian Cutress, Senior Editor at AnandTech. "The dream would be to enable science fiction-level virtual experiences on lightweight, all-day wearable devices."
Research firm IDC projects the global market for AR/VR semiconductors will grow from $1.8 billion in 2021 to over $7 billion by 2026, representing a nearly 32% compound annual growth rate. Qualcomm, Meta, and others are betting that much of that growth will be driven by purpose-built chips.
The Metaverse Economy
If the metaverse lives up to the grandiose visions laid out by tech billionaires and science fiction authors, it could fundamentally reshape the digital economy. Virtual worlds may become the primary place where people socialize, work, shop, learn and play.
This would have profound implications for businesses across industries, from retail and entertainment to education and healthcare. Companies that fail to adapt their strategies for this new landscape risk getting left behind.
Semiconductors will play a crucial enabling role in this transformation. Much like the global supply chain crunch and geopolitical tensions around leading-edge chips today, metaverse silicon could carry significant economic and strategic weight in the future.
"The metaverse has the potential to be one of the biggest drivers of semiconductor demand in the coming decades," said Alan Priestley, VP Analyst for Silicon Ecosystem and Trends at Gartner. "Beyond just the processors in headsets and glasses, huge investments will be needed in 5G connectivity, edge computing, AI accelerators, and other supporting technologies to bring these immersive experiences to the masses."
Underscoring this point, Meta lost a staggering $2.8 billion in Q2 2022 on its Reality Labs division, the internal unit responsible for developing VR/AR hardware and software. CFO Dave Wehner attributed the operating losses to Meta‘s heavy investments in "developing the next generation of our consumer hardware, software, and developer ecosystem."
Risky Business
Despite the undeniable long-term potential, Meta‘s bet on the metaverse and custom silicon is not without risks. For one, if the partnership with Qualcomm fails to produce chips that are competitive with offerings from Apple and others, it could set back Meta‘s hardware plans by years.
Designing chips from scratch is hugely expensive and resource-intensive. Issues with the development process or supply chain could lead to delays or cost overruns. Even tech giants like Intel have struggled mightily to bring new chip architectures to market on time and on budget in recent years.
There are also signs that initial enthusiasm for the metaverse from the tech industry and venture capitalists may be cooling amid the broader economic downturn. A prolonged "VR winter" could sap investment and slow the pace of innovation in the space.
Meta in particular faces skepticism from some industry watchers about whether its famously advertising-driven business model will translate to the metaverse. The company may need to explore new ways of monetizing virtual experiences, such as in-app purchases or subscription services, to recoup its massive upfront investments in the technology.
The Future in Pixels
Looking five to ten years out, it‘s possible to envision several paths the Meta-Qualcomm partnership and metaverse silicon more generally might take as the technology matures and the market takes shape:
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More Specialized Architectures: The first generations of custom chips may focus on optimizing existing mobile/PC processors for VR/AR. But over time, expect to see wilder architectures emerge purpose-built for metaverse applications from the ground up. Chips with massive arrays of accelerators for physics simulation, neural rendering, and other tasks could become common.
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Tighter Hardware/Software Integration: Following the Apple model, Meta and others may seek to more deeply integrate their custom silicon with proprietary operating systems, SDKs, and content creation tools. This could give them greater control over the full stack and enable differentiated experiences, but risks fragmenting the market.
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Photonics Boom: As the demand for higher bandwidth and lower latency in VR/AR devices grows, traditional electrical chip interconnects will likely run into a wall. Silicon photonics, which uses light to move data between components, could see a major boost from the metaverse. Disruptive new players may emerge to challenge incumbents.
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"Metaverse-on-a-Chip": In the very long term, we could see extremely high levels of integration where nearly all the compute, sensing, and connectivity needed for the metaverse is packed onto a single piece of silicon. Expect intense competition among semiconductor giants to produce the first "metaverse-on-a-chip."
Of course, any attempt to predict the future of a technology as fluid and fast-moving as the metaverse is bound to be imperfect. The only certainty is that the coming years will bring rapid change and no shortage of surprises.
What is clear is that the age of the metaverse is upon us, and semiconductors will be its central nervous system. Meta and Qualcomm fired a shot across the bow with their partnership, but the battle for the silicon that will bring this next computing era to life is just beginning. Buckle up.