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EXCERPTED FROM THE ORIGINAL: See inside cover for details. FINANCIAL BACKING GLOBAL INTEREST SHIPPING OUT SELLING OUT INTEREST IN THE PAST READY TO BUILD A WAVE OF CONTENT ON THE WAY RETAIL VALUE HOME REDESIGN, REIMAGINED EASIER TO IMAGINE YOURSELF AT HOME Video • Jaunt The Ecosystem • NextVR Virtual Reality / Augmented Reality • VRSE • Oculus Story Studio • GoPro • IG Port Processors Games • TI Applications • Sony • Qualcomm • Ubisoft 3D Audio • STMicro Graphics • CCP Games • Nvidia • TI • Realtek • Oculus Story Studio • AMD • Wolfson • Himax • Tammeka Games • Qualcomm • Realtek • MediaTek • Pixel Titans • Intel • Capcom Augmented Reality Virtual Reality Engineering • Microsoft HoloLens • Facebook Oculus Head–mounted devices • Autodesk • Google Glass • Samsung Gear VR • Dassault Systèmes • Magic Leap • Google Cardboard • IrisVR • Atheer • HTC Vive • Visidraft • Osterhout Design • Sony PSVR • MakeVR Memory Group • Vuzix iWear (DRAM/SSD) • VR Union Claire • Micron Healthcare • Samsung • Psious • SK Hynix • zSpace • Toshiba • Conquer Mobile • 3D Systems Social • Altspace VR • High Fidelity • Podrift Commerce • Sixense {shopping} • Matterport {real estate} Display • Samsung • JDI Cameras • Himax • 360Heros • Crystal • GoPro Odyssey 3D Lenses • Nokia OZO • Wearality • Jaunt NEO • Zeiss • Matterport Pro 3D Components • Canon • Nikon Haptics • Largan • Alps Position/ Room Tracker • AAC • Hon Hai • Nidec • Pegatron • Flex • Jabil • HTC Motion Sensors • Leap Motion • InvenSense • TI • STMicro • Honeywell The Ecosystem Virtual Reality / Augmented Reality Total Addressable Market 2025 Base Case VR/AR Estimates VIDEOGAMES SOFTWARE HARDWARE $11.6bn $35bn $45bn • Estimated users: 216mn • 60% of VR/AR software • 4 main devices used to experience • Markets disrupted: videogames revenue will be driven by the VR/AR: HMDs, host systems, consumer (vs. enterprise/ tracking systems and controllers LIVE EVENTS public sector) • Our forecast is specific to HMDs $4.1bn • Videogames will be the first • Our base case assumes 125mn • Estimated users: 95mn consumer market to develop annual shipments by 2025 • Markets disrupted: live ticket sales • Beyond videogames, we see VIDEO ENTERTAINMENT real estate, retail and healthcare among the first $3.2bn markets disrupted • Estimated users: 79mn • Markets disrupted: online streaming RETAIL $1.6bn • Estimated users: 32mn • Markets disrupted: e-commerce REAL ESTATE $2.6bn • Estimated users: 0.3mn • Markets disrupted: commissions EDUCATION $0.7bn • Estimated users: 15mn • Markets disrupted: K-12 and higher-ed software HEALTHCARE $5.1bn • Estimated users: 3.4mn • Markets disrupted: patient monitoring MILITARY $1.4bn • Estimated users: 0.7mn • Markets disrupted: defense training and simulation ENGINEERING $4.7bn • Estimated users: 3.2mn • Markets disrupted: CAD/CAM software January 13, 2016 Americas: Technology Virtual and augmented reality in 6 charts Exhibit 1: Our VR/AR unit forecasts assume far slower Exhibit 2: Our three scenarios for a 2025 VR/AR hardware adoption than smartphones or tablets market 350 800,000 700,000 Smartphone shipments 300 Accelerated Uptake from 2004-2012 600,000 $110bn 250 500,000 Tablet PC TV $63bn $99bn 400,000 Accelerated 200 uptake Notebook PC 300,000 $111bn 150 Tablet shipments Unit shipments (000's) 200,000 from 2010-2016E Base Case Desktop PC Base case $45bn $62bn 100 100,000 Annual shipments(mns) Delayed Game Console uptake $14bn 0 Delayed Uptake 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 50 $15bn Base case Accelerated uptake Delayed uptake Tablet shipments 0 Smartphone shipments $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 ASP ($) Source: Goldman Sachs Global Investment Research, IDC. Source: Goldman Sachs Global Investment Research, IDC. Exhibit 3: Our combined 2025 VR/AR hardware and Exhibit 4: Our 2025 base case VR/AR software software scenarios assumptions by use case $200bn Military, $1.4bn $180bn Engineering, $4.7bn $160bn $72bn Videogames, $140bn $11.6bn $120bn $100bn Healthcare, $5.1bn $80bn $60bn $35bn $110bn $40bn $8bn Education, $0.7bn $20bn $45bn $15bn Real estate, $2.6bn $0bn Live events, $4.1bn Accelerated uptake Base case Delayed uptake Retail, $1.6bn Hardware Software Video entertainment, $3.2bn Source: Goldman Sachs Global Investment Research. Source: Goldman Sachs Global Investment Research. Exhibit 5: The progression of our base case hardware and Exhibit 6: HMD price declines could be similar to what software forecasts we’ve seen in the past $90.0 $3,500 $80.0 $3,000 $70.0 $2,500 $60.0 Notebooks CAGR: -6.5% $50.0 Desktop ASP $2,000 Desktop CAGR: -5.2% Notebook ASP $40.0 Tablet PC ASP $1,500 Revenue ($bns) Smartphone ASP $30.0 LCD-TV ASP $20.0 $1,000 $10.0 $500 LCD-TV CAGR: -8.6% $0.0 Tablet CAGR: -13.4% Smartphone CAGR: -5.1% 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E $0 Hardware revenue - base case Software revenue - Base case 1994 1999 2004 2009 2014 Source: Goldman Sachs Global Investment Research. Source: Goldman Sachs Global Investment Research. Goldman Sachs Global Investment Research 8 2,500,000 100% 500,000 100% The last 16% - The next 68% - the majority The next 68% - the laggards the majority 90% 450,000 90% The first 15% - 2,000,000 80% 400,000 early adopters 80% and innovators The first 15% - early 70% 350,000 70% adopters and innovators 1,500,000 60% 300,000 60% 50% 250,000 50% 1,000,000 40% 200,000 40% Units shipped(000s) Units Units (000s) shipped 30% %penetration tablet % smartphonepenetration 150,000 30% 500,000 20% 100,000 20% 10% 50,000 10% 0 0% 0 0% 2010 2011 2012 2013 2014 2015E 2016E Smartphones Feature phones Smartphone penetration (% of total handset shipments) Tablets Notebooks Tablet penetration (% total tablets + notebooks) January 13, 2016 Americas: Technology Exhibit 11: VR/AR HMD market has the potential of reach over $100bn annually by 2025 350 300 Accelerated Uptake $110bn 250 Tablet PC TV $63bn $99bn 200 Notebook PC $111bn 150 Base Case Desktop PC $45bn $62bn 100 Annualshipments (mns) Game Console $14bn Delayed Uptake 50 $15bn 0 $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 ASP ($) Source: Goldman Sachs Global Investment Research, IDC The following chart lays out our base case, accelerated uptake case, and delayed uptake case for VR/AR shipments and overlays the adoption curve for smartphones (starting in 2004) and tablets (starting in 2010). Exhibit 12: Our VR/AR shipment assumptions vs. the smartphone and tablet ramps 800,000 700,000 Smartphone shipments from 2004-2012 600,000 500,000 400,000 Accelerated uptake 300,000 Unit shipments (000's) 200,000 Tablet shipments Base case from 2010-2016E 100,000 Delayed uptake 0 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E Base case Accelerated uptake Delayed uptake Tablet shipments Smartphone shipments Source: Goldman Sachs Global Investment Research, Gartner for tablet shipment data Goldman Sachs Global Investment Research 15 • • • • • • • • • • • • • • • • • • • • • • • • • • .
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