China Galaxy Securities: Technological breakthroughs foster interactive innovation, expanding the AI glasses market and deepening competition.

China Galaxy Securities released a research report stating that AI glasses are gradually evolving into the core carrier of the new generation of human-machine interaction. The industry is expected to reach a key turning point in 2023, backed by breakthroughs in multiple core technologies. The addition of AI features will present an efficient value proposition of "small incremental cost for large incremental experience", and can naturally attract the vast user base of traditional glasses and sunglasses. Currently, AI smart glasses dominate in terms of shipments, and sales are expected to enter a continuous growth channel starting from 2025, with sales expected to exceed 2.7 million units in 2027. In terms of market structure, there is a characteristic of leading companies leading the pack, with many brands following suit, and further adopting a dual-line parallel product strategy. The main points of China Galaxy Securities are as follows: Technological breakthroughs drive interactive innovations, highlighting the potential for terminal substitution AI glasses are gradually evolving into the core carrier of the new generation of human-machine interaction. The industry is expected to reach a key turning point in 2023, backed by breakthroughs in multiple core technologies. On one hand, multimodal large models are becoming mature, and through model compression technology, they are successfully deployed to terminal devices, enabling lightweight devices to possess complex speech and environmental interaction capabilities. On the other hand, the introduction of dedicated low-power chips provides a hardware foundation for all-weather offline voice interaction and real-time translation, while a multi-chip heterogeneous architecture and replaceable battery design further optimize the balance between power consumption and battery life. At the same time, there have been breakthroughs in the form of AR glasses, with waveguide technology significantly reducing the thickness of lenses, and with the application of new materials such as carbon fiber, achieving a wearing experience close to regular glasses. In terms of user base, the current global population with visual impairment has reached 2.2 billion, and the global sunglasses market size is expected to be around $22.32 billion by 2024. The addition of AI functionality will present an efficient value proposition of "small incremental cost for large incremental experience", and can naturally attract the vast user base of traditional glasses and sunglasses. These technological advancements collectively drive AI glasses from being an accessory of a smartphone to becoming an independent smart device that can provide value in multiple scenarios, and the vast user base lays the foundation for its future replacement of smartphones as the new terminal. Market expansion deepens competition, forming a multi-layered pricing structure The global AI glasses market is currently in a key stage of rapid expansion and structural differentiation. Currently, AI smart glasses dominate in terms of shipments, accounting for 78% of shipments in the first half of 2025. It is estimated that by 2028, global AI glasses shipments will reach the level of 20 million units. AR+AI glasses, as the future form of smart glasses, are expected to enter a continuous growth channel starting from 2025, with sales expected to exceed 2.7 million units in 2027. In terms of market structure, there is a characteristic of leading companies leading the pack, with many brands following suit, and further adopting a dual-line parallel product strategy. Overseas brands have occupied a significant market share due to their first-mover advantage and ecosystem integration, with a complete product lineup ranging from basic functions to high-end display models. Chinese manufacturers have adopted a more flexible market strategy, quickly entering different consumer levels through differentiated pricing, forming a multi-layered pricing system from thousands to tens of thousands of yuan. This pricing structure essentially reflects the differences in inherent technology, with low- to mid-range products focusing on basic photography and audio functions, while high-end models integrate complex AR display systems. Weak user experience and cost constraints, application ecosystem urgently needs improvement The scale popularization of AI glasses faces multiple challenges. Poor user experience directly leads to high product return rates, while high costs pose a barrier. Optical displays (43%) and main control chips (31%) account for the majority of the overall machine cost, with waveguide lenses and display technologies as key cost constraints. In terms of optical displays, based on the product trends released at CES 2026, waveguides have become the mainstream direction, while display technology is evolving along the paths of single green and full-color Micro-LED. Multiple manufacturers jointly layout the foundation of the supply chain for large-scale popularization, or will potentially lower cost barriers in the future. On the application ecosystem level, the domestic market presents a fragmented brand ecosystem, limiting the core value of devices in everyday scenarios. However, among the products released at CES 2026, Rokid supports multiple AI engines and has established cooperation with multiple applications, making breakthroughs in the ecosystem. In addition, the absence of privacy and security norms requires the establishment of clear standards through industry collaboration to build user trust. Despite the existing issues with AI glasses, with gradual improvements in products and ecosystems, and with the revolutionary experience and scene expansion of existing terminals, AI glasses still have the potential to become the core carrier connecting humans and the digital world. Risk Warning Risks of technological iteration falling short of expectations; risks of fluctuations in the core supply chain; risks of lower-than-expected downstream consumer demand.