How much does it cost to make a VR headset?
With the influx of cheap VR headsets in the market, a casual VR buyer may often wonder why some virtual reality headsets are so expensive while others are more affordable. Compare the price of Google Cardboard with Oculus Rift and you will see the price difference.
Are higher priced headsets worth the money? How much would it cost to create one? In this article, we will try to answer these questions.
In 2016, Oculus Rift’s developer version was sold for about $1000+ a piece. Today, their standalone device Oculus Go retails for $200. The reason for the price difference is the product life cycle.
Producing that first functional virtual head mounted device was probably a lot more expensive for Oculus than the retail version it sells now. Each component has to be bought at a retail price, some parts fabricated from the ground up and a few created specifically to meet the requirements.
Apart from parts, there is also the cost of research and development, the staff salary, location and utilities to be considered. For Oculus, the cost of producing that first market-ready headset is said to be about 2.5 million dollars.
The story of producing electronic goods almost always follows a similar path.
- An expensive R&D period where millions are poured into creating the first functional prototype.
- Improvements are introduced in small iterations until the prototype meets most of the design requirements.
- The first batch goes to production for beta testers. Problems are logged and solution engineering engaged.
- Based on the response on the first batch, the company may send a bigger second batch to production. Sales may be opened to the developer world at a premium price.
- More debugging and problem resolutions follow. Based on the market appetite the first mass production will start. Depending on economies of scale, the price could be brought down a bit.
- Introduce new upgrades after resolving pending hardware issues, economies of scale help further reduce the cost of production as the product is priced to be competitive in the market.
This sequence goes on until the end of the product cycle. Virtual reality went through a similar product cycle to bring out devices like Oculus Rift or Oculus Go.
Companies like Google take a different approach to their VR tools. They are more interested in promoting Android as VR input device than selling a VR headset. So they would try to create a very low-cost alternative that is easily producible and could also be done as a do-it-yourself device.
Once a good product hits the market, it would be cheaper to reverse engineer a headset. This is how most of the unnamed Chinese headsets flood the market after a product becomes popular. Some of them take the precautions built into the device while the rest may take a more liberal approach. This is why there will be a price difference between a named brand and an unnamed one.