Guosen: Smart glasses enter an important year of commercialization for the consumer market. Seize the opportunity in channels and products.

Guosen released a research report stating that this year, under the progress in technology, product innovation, and gradual improvement of industry standards, the overall development trend of AI glasses has been good. For example, the China Academy of Information and Communications Technology's Thurl Terminal Laboratory collaborated with SDreamLab to conduct comprehensive testing on the RayBan-MetaWayfarer smart glasses, providing reference evaluation indicators for the AI glasses industry, promoting technological innovation and industry standardization, and facilitating the sustainable development of the industry ecosystem. Global sales of AI smart glasses are expected to reach 1.52 million units by 2024, and are projected to grow by 230% in 2025 with further technological advancements and demand development. With the rapid development of the industry, the entire industry chain will encounter growth opportunities, including upstream lens providers, various AI glasses brands, and downstream eyewear sales channels. 1) Offline eyewear stores are an important and irreplaceable core channel for the promotion and sales of AI/AR glasses in the future. Early physical presence, especially brand partnerships, are expected to reconstruct the core competitive elements of this industry chain. It is recommended to pay attention to the leading eyewear chain Doctorglasses Chain (300622.SZ). 2) Lens manufacturers have the opportunity to enhance the value of their products by providing high-quality lenses, thereby achieving higher profit margins. It is recommended to focus on the leading resin eyeglass lens manufacturer CONANT OPTICAL (02276). Key points from Guosen: Intelligent glasses enter an important year for commercialization at the consumer end, welcoming multidimensional development opportunities From the birth of the first intelligent glasses Google Project Glass in 2012 to now, intelligent glasses have gone through 12 years. Its technology has also undergone multiple iterations, gradually transitioning from a niche market to a qualitative leap, becoming one of the few categories of AI hardware devices that have started to generate demand for mass production. According to WellsennXR, global sales of AI smart glasses are expected to reach 1.52 million units by 2024 and are projected to reach 3.5 million units by 2025, a growth of 230% compared to 2024. With the continuous surge of the AI glass market, the entire industry chain will encounter growth opportunities, including upstream lens providers, various AI glasses brands, and downstream eyewear sales channels. Market Driver 1: Accelerated deployment of large models, AI glasses usher in technological breakthroughs Compared to previous AR glasses designs, the functions of AI glasses primarily focus on the visual and auditory fields, and incorporate personalized AI assistants. Therefore, on one hand, their products are thinner and more closely integrated into daily life, with enhanced comfort in wearing, helping to lower consumer entry barriers; on the other hand, by strengthening images and interactions such as language through AI large models, further integrating visual, auditory, and linguistic interaction methods of the human body, AI glasses are expected to become one of the best hardware carriers for the deployment of AI technologies. In recent times, both domestic and foreign manufacturers have made groundbreaking progress in large models, particularly with the introduction of DeepSeek-R1 in January 2025. Its low demand for computing power for single-time training and inference makes the cost of secondary training based on DeepSeek also lower, which is advantageous for enterprises to train and deploy locally at a lower cost. Its open-source nature also provides a technical foundation for enterprises, making it easier for various industries to build vertical application scenarios based on their own business situations, further accelerating the penetration of AI technologies in applied industries. Market Driver 2: Active layout by domestic and foreign manufacturers, continuous enrichment of product supply In the current market, MetaLens Chat and RayBan Meta are intelligent glasses without cameras/cameras, respectively, while related products like Rokid Glasses are smart glasses with displays, showing continuous breakthroughs in both hardware and software aspects of AI glasses. Domestic manufacturers have also successively released various AR+AI glasses products, such as Thunderbird Innovation's Thunderbird X2, StarVAir2 from Meizu's Xingji Meizu, and EvenRealitiesG1. With the continuous enrichment of products, consumers have more options, further stimulating rapid market expansion. Channels and product ends jointly encounter growth opportunities Firstly, at the channel end, unlike other consumer electronics categories, AI glasses have key roles in the purchasing process like eye examinations and wearing experiences, making offline eyewear stores important channels for the promotion and sales of AI/AR glasses. Early physical presence, especially brand partnerships, are expected to reconstrue the core competitive elements of this industry chain. Most AI glasses products are actively entering chain eyewear stores, utilizing a "experience first, purchase later" model to increase product conversion rates. For example, according to reports from Hives Technology, the Jiehuan AI audio glasses have entered over 700 eyewear stores nationwide, with 70% being professional eyewear stores. On September 10, 2024, StarVAir2 from Meizu signed a strategic cooperation agreement with Doctorglasses Chain, authorizing Doctorglasses Chain as the distribution partner for XR smart glasses, promoting product sales and brand promotion through Doctorglasses Chain's online sales platform and over 100 retail stores. Key Leader: Doctorglasses Chain As a leading eyewear channel in China, as of June 30, 2024, Doctorglasses Chain has 530 stores. Its layout of intelligent glasses is reflected in channel sales, capturing the dividend of intelligent glasses products: as early as in 2019, the company established a partnership with Huawei to become its offline eyewear retail channel.Exclusive partner of Dao; in recent years, the company has also established stable cooperation relationships with leading smart glasses brands such as Star Mito, Liweike, Thunderbird Innovation, and ROKID. The company provides consumers with one-stop optical + smart glasses fitting services, and by the end of October 2024, has set up smart glasses counters in 100 offline stores nationwide.On the other hand, the company cooperated with smart glasses brands to establish a joint venture company and jointly participate in research and development, etc. For example, in August 2024, the company signed a cooperation agreement with the smart glasses company LeiNiao Innovation and established a joint venture company. Doctorglasses Chain invested 3 million yuan and held a 20% stake. The joint venture company plans to develop the first generation of shooting glasses, audio+AI glasses, and generate revenue through licensing fees. Doctorglasses Chain is mainly responsible for offline channel sales and promotion, participating in product research and design, and having common decision-making power on key strategies such as products, channels, and marketing. By January 2025, LeiNiao Innovation announced the LeiNiao V3AI shooting glasses jointly developed with the company, priced at 1799 yuan, and capable of high-definition shooting, audio, and smart AI functions. On the product side, the optical display unit accounts for a relatively high proportion in the cost structure of smart glasses, with the lens as a key core component directly affecting the optical performance and user experience of the product. Therefore, lens manufacturers have the opportunity to increase the added value of the product by providing high-quality lenses, thereby obtaining higher profit margins. Looking at the cost structure, take the popular smart glasses RayBanMeta as an example (Meta launched jointly with RayBan). According to WellsennXR data, the total cost of RayBanMeta is $174, with the mainboard chip accounting for $99.1, or 57%; the structural components, including the lens/frame, cost $16.9, accounting for 10%, with the lens+frame accounting for a high proportion and being an important part of improving the user experience. Core Leader: CONANT OPTICAL The company's main business is the manufacturing of resin eyeglass lenses. When calculated based on the resin eyeglass lens production in 2020, it is the largest manufacturer in the country, with products covering 90 countries worldwide. In terms of AI glasses layout, it mainly includes: 1) Established an XR (extended reality) research and service center in 2024 to provide support and services for potential precision optical business from both the technical and market ends. 2) Purchased land in Thailand for constructing an automated production line for the production and processing of lenses matching XR products. 3) External cooperation: Introducing the smart hardware company Goertek Inc. as a strategic shareholder, the proceeds of the share placement will be used for the research, design, and manufacturing of lenses and visual solutions for smart glasses and XR headsets. The company has also cooperated with multiple global technology companies in the field of XR products and has received research and development expenses and order payments according to signed purchase orders. Additionally, in November 2024, the company announced an equity incentive plan to further stimulate employee motivation. The company intends to award 11.93 million restricted shares as stock awards to incentive objects, accounting for approximately 2.8% of the total number of shares issued by the company. The performance indicators of the plan are that the company's net profit growth rate should not be less than 21%/17%/15% in 2025/2026/2027. Risk Warning Consumer sentiment is lower than expected; AI technology development is not as expected; Blindly investing in new technology under uncertain prospects may lead to profit pressure for the company; The risk of homogenization of AI products may lead to vicious competition and price wars in the industry.