“While sales from various branded vendors have been brisk, this year’s VR device shipments will be mainly influenced by the supply side of the market,” said Jason Tsai, wearable device analyst for TrendForce.

“Branded vendors were overly conservative in stocking up their inventories before the market releases of their products. They are now seeing the product demand far outstripping the supply and will have to adjust their inventories in the next two quarters, or else the undersupply situation in the VR device market will likely persist to the second half of 2017.”

Moreover, software is fast becoming the largest opportunity in the VR industry. TrendForce estimates that the total value of the VR market in 2020 will surpass US$70 billion, of which nearly 60% will come from software. “The strong sales performances of various devices in the VR market will attract more new entrants from the hardware field,” said Tsai. “Many software developers will also enter the market in the next two to three years to help expand the range of VR applications.”

TrendForce’s latest analysis indicates that PS VR will overwhelm its competitors this year, taking 67% of the global VR device market with about 6 million units shipped. In comparison, Oculus will ship 2.3 million units of Rift while HTC will ship just 700,000 units of Vive. The cumulative shipments of PlayStation 4 (PS4) gaming consoles are expected to exceed 50 million units by the end of this year. PS VR will therefore benefit from the large PS4 user base as they are potential buyers.

Moreover, first-time buyers of VR devices will find the combined package of PS4 and PS VR more economical. HTC’s Vive offers higher performance capabilities, but its average selling price is quite high. PS VR on the other hand is priced for general consumers looking for new forms of interactive entertainment and recreational activities with family and friends. PS VR is also an attractive choice for hardcore gamers because Sony and third-party developers will launch many Triple-A VR titles for the device in the near future.