Xiaomi enters the AI glasses market: Is it the Chinese version of Meta, or the next Shanzhi?

China's "AI glasses" track has finally welcomed a truly significant "big player."

On the evening of June 26, Xiaomi launched its first AI smart glasses at a press conference.

From the product design perspective, Xiaomi's AI glasses bear a high degree of similarity to Meta's Ray-Ban Classic—both feature a black frame design, equipped with dual-side cameras and status indicator lights, while the speakers and battery module are cleverly hidden in the temples.

Even in pricing strategy, Xiaomi chose to embrace Meta, with a starting price of 1,999 yuan, which offers a price advantage of less than 200 yuan compared to Meta's glasses, which start at 299 USD.

Meta's smart glasses have sold over a million units in the past two years. Although Meta has already validated the feasibility of the business model in the smart glasses field, it will not be easy for Xiaomi to replicate this success in this track. Even as a well-known brand with a complete supply chain and factory assembly lines, Xiaomi still needs to carve out a differentiated development path suitable for itself in the face of multiple challenges such as technological barriers, ecosystem construction, and user habit cultivation.

The Next Meta is Hard to Achieve

There are many lessons to learn from the success of MetaRay-Ban.

This smart glasses, which has sold over 1 million units globally, is actually the second-generation product launched by Meta and Ray-Ban in 2023. Although the appearance design is almost identical to the first-generation product released in 2021, the market performance of the first-generation glasses was dismal—by February 2023, the shipment volume was less than 300,000 units, with only 27,000 monthly active users, in stark contrast to the popularity of the second-generation product.

How did the second-generation product manage to transform AI glasses from "electronic waste" to "hot commodity" in just two years without changing the basic form? Looking back, the key lies in the fact that all technological upgrades coincided perfectly with the rhythm of the times.

The comprehensive hardware upgrades laid the foundation for user experience. Compared to the poor shooting quality of the first-generation product, the second-generation glasses are equipped with higher-spec cameras, significantly improving imaging effects, making users genuinely willing to use them as daily shooting tools. Meanwhile, the expanded storage space, enhanced processor performance, optimized audio experience, and extended battery life allow this device to partially take over mobile phone usage scenarios, increasing the duration and frequency of user wear.

Moreover, the strong bundling with social networks is the most correct thing Meta did with this device. Users can connect Facebook or Instagram through Meta's smart glasses to start live streaming, and they can also long-press the button on the right temple to have the device read comments, interacting with the audience in the live stream In addition, the device also supports sharing first-person perspective footage during video calls on WhatsApp and Messenger, providing an immersive communication experience for the other party.

With the more powerful LlamaAI, these glasses have for the first time embodied the form and experience of the "future."

Zuckerberg stated during his guest appearance on the Acquired podcast last year: "Smart glasses are the perfect AI assistant and the ultimate digital social tool."

Based on this judgment, along with market validation for Meta's glasses, the entire smart glasses industry chain—from upstream suppliers to downstream manufacturers, from the primary investment market to the secondary trading market—has once again focused its attention on this fluctuating field over the past year.

Xiaomi is one of the players re-entering the market.

The AI glasses released this time are not Xiaomi's first attempt in the smart glasses field. Interestingly, Xiaomi's initial foray into this area was also inspired by Meta.

In 2021, Facebook, which had been operating for over 17 years, officially rebranded as Meta, with Zuckerberg boldly announcing a full commitment to the metaverse. Against this backdrop, Xiaomi keenly realized that smart glasses could become the next generation of smartphones, leading to the launch of the Xiaomi Smart Glasses Explorer Edition. Unfortunately, this product has yet to achieve commercial sales.

Now returning to the AI glasses track, Xiaomi clearly hopes to leverage the successful model of Meta and Ray-Ban to achieve breakthroughs, but whether it can fully replicate their success path poses a significant challenge for Xiaomi.

Most foreign media comments indicate that the success of Meta's collaboration with Ray-Ban is mainly attributed to Meta's generative AI technology and its accurate grasp of social media trends. However, it is often overlooked that Ray-Ban's brand influence is the core factor driving more consumers to make purchases.

As a well-known American sunglasses manufacturer, Ray-Ban is currently one of the largest eyewear brands globally, holding a 5% market share in the highly fragmented eyewear market. In the relatively concentrated sunglasses market, especially in North America and Europe, where it accounts for over 60%, Ray-Ban is a leading player with significant brand appeal.

Since the launch of Meta's second-generation smart glasses, there are now over 25 styles across three major series, with fashionable designs influencing user groups such as trend bloggers, tech enthusiasts, and fashion buyers, who have naturally become the first users of Meta's smart glasses Similar successes have precedent in China—Huawei's collaboration with the South Korean eyewear brand Gentle Monster in 2019 helped Huawei's smart glasses quickly break into the market. It was precisely with the support of external brands that Huawei, which had never ventured into audio glasses, launched its first product that successfully broke through.

In the product experience before the launch event, Tencent Technology invited many people around to try on the test model of Xiaomi AI glasses, and over 70% of the testers' primary negative feedback on these glasses focused on the aspect of "design not being refined or fashionable."

Clearly, Xiaomi urgently needs to find its own Ray-Ban or Gentle Monster.

The "Essential Need" Problem Remains Difficult to Solve

Another factor that tests whether Xiaomi AI glasses can succeed is market scale.

In the past few years, Xiaomi has launched multiple audio glasses products under its ecological chain brand Mijia, achieving the second position in the Chinese market. However, weak market demand has left audio glasses in an awkward position of being "neither tasty nor worth discarding."

According to online monitoring data released by Loto Technology in September 2024, from January to July 2024, the cumulative online sales of smart audio glasses in China were only 70,000 units. The two major brands, Huawei and Xiaomi, occupy the vast majority of market share, with Huawei holding 60.3% of the overall market share and Xiaomi accounting for 24.4%.

Although market research institutions generally have a positive outlook on the long-term growth prospects of AI glasses, the internationally renowned market research firm Grandview Research has predicted that this market will maintain a compound annual growth rate of 27.3% by 2030. Statista data also shows that the consumer market size for AR glasses and headsets reached $6.3 billion in 2024, and is expected to exceed $8.5 billion in 2025.

Xiaomi is clearly betting on the future potential of the AI glasses market. According to institutional forecasts, the market size for AI glasses will reach approximately $13 billion in five years.

However, under the halo of Meta Ray-Ban's blockbuster product, there is a clear disconnect between macro market growth expectations and consumers' actual purchasing intentions and usage frequency. The "essential need" once again becomes a mountain that must be crossed in the development of smart glasses.

The market's enthusiasm for the AI glasses concept has never cooled. According to supply chain news, after Meta glasses became popular worldwide, more than 20 brands in China are developing similar products, and with teams seeking financing, it is estimated that over 50 teams are attempting to create similar products.

At CES 2025, Goertek showcased a lightweight AR glasses reference design.

These products have appeared at major global tech exhibitions over the past year, but the increase in market penetration has remained lukewarm. To this day, the industry has yet to produce a truly "mass-market blockbuster" product This "grand momentum yet slow implementation" situation precisely reveals that AI glasses still need to overcome the long journey of dual thresholds in technology and market acceptance, from laboratory concepts to mature products, and then to mainstream market acceptance.

Gross Margin is the Lifeline

The inability to form an effective "rigid demand" directly impacts the high manufacturing costs of smart glasses.

After Meta's smart glasses became popular worldwide, someone analyzed the BOM (Bill of Materials) cost of these glasses. A pair of glasses priced at $299 has a BOM cost as high as $174, accounting for 58% of the selling price. The cost of the glasses' mainboard is close to $90, and this is without the optical waveguide AR structure in Meta's glasses.

In contrast, TD Cowen's report on the material cost of the iPhone 16 Pro Max shows that a $1,199 iPhone 16 Pro Max has a BOM cost of only $485, about 40% of the selling price. Meanwhile, Counterpoint Research's "Global Smart Glasses Model Shipment Tracking Report" indicates that the total global shipment of smart glasses will barely exceed 2 million units in 2024, a number that is even less than a fraction of the annual shipment of the iPhone 16 series.

The high manufacturing costs and the almost disproportionate sales scale restrict the development of the smart glasses industry. Even a global top tech company like Meta, with supply chain advantages, cannot better control costs due to market scale issues.

Even more alarming is the disproportion between R&D investment and returns.

Meta Reality Labs department's revenue and operating cost data for 2021-2024 (in billions of dollars)

According to Meta's 2024 annual financial report, the Meta Reality Labs department lost $17.7 billion in 2024, with hardware sales contributing only $2.146 billion in revenue, resulting in a loss rate of 89%. This "capital market blood transfusion to maintain iteration" script has frequently played out in the virtual reality track over the past 15 years. Although the Quest 3S became the best-selling gaming console on Amazon in the fourth quarter of 2024, it still incurred a loss of $4.97 billion in a single quarter.

The seemingly low-cost AI glasses products actually raise the entry threshold for small teams in this track due to the huge R&D investment and yield issues behind them A typical example is Shanji, a technology company established 6 years ago, which became popular online with the release of its "Paipai Mirror" priced at only 999 yuan at the end of last year. However, subsequent supply issues were shocking, as after the pre-sale of 500 units sold out, the expected delivery time for some regular orders was generally pushed to December. This means that if a user chooses to order a Shanji Paipai Mirror in January this year, they may face a long wait of about 300 days.

Zuckerberg explained in a conversation with Acquired why Meta continues to invest heavily in the loss-making virtual reality business. He stated that Meta is not focused on current losses; they believe that glasses and holographic images will become ubiquitous products in the next 10-20 years, and Meta is positioning itself for the future.

However, there is a clear premise to Zuckerberg's statement: "the company's scale has reached the level of Meta."

In other words, even someone as strong as Zuckerberg knows that there will be no positive returns in the short term for the smart glasses (including virtual reality) sector. The explosive success of Meta Ray-Ban's second generation was an unpredictable success in the market. What can be done now is to continue investing in research and development, waiting for the day when it becomes "ubiquitous."

Shanji's founder, Zhang Bo, revealed in an interview after the Paipai Mirror launch that Shanji's goal is to achieve an annual shipment of around 500,000 units, which is a prerequisite for achieving break-even.

Before reaching this scale, Shanji still needs to rely on charging products to contribute cash flow to the company. It is evident that even with a large Chinese market, a shipment of 500,000 units is a huge challenge for a company of Shanji's size.

Fortunately, like Meta, Xiaomi has continuous capital investment and layout. Xiaomi has a vast IoT hardware ecosystem and controls what may be the best technology product supply chain in the world, which is enough to help Xiaomi minimize material and research and development costs in a short period.

The release of Xiaomi's first AI glasses signifies that domestic major manufacturers are returning to the forefront of smart glasses. This product also provides a reference path for startups with "technology licensing + OEM production." According to IDC's forecast, competition in the global AI glasses market will become increasingly fierce, and ultimately, there may be very few survivors, with competition revolving around the life-and-death line of a 40% gross margin.

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