AUGMENTED reality (AR) glasses maker Xreal is raising fresh funding at a valuation that tops US$1 billion, according to chief executive officer Chi Xu, aiming to get out ahead of future devices from Apple, Meta Platforms and Alphabet’s Google.

The Chinese startup is raising US$60 million in the round, bringing its total to more than US$300 million, Chi said. That latest money comes from a key supply chain partner that he declined to identify.

“This will help us scale our manufacturing capabilities and research and development,” he said, adding that the company has enough capacity to meet demand for its glasses this year but needs the money to fulfil orders in 2025.

Xreal is looking to blaze a trail in augmented reality – technology that overlays data and imagery over real-world views. The company accounted for about half of the market for AR-only devices in the third quarter of last year, according to research firm IDC. The larger combined virtual reality and AR market – known as mixed reality – features Meta as the leader, followed by Sony Group and ByteDance. Xreal holds about 4 per cent of the overall market.

Chi said that his company has the ability to produce between 500,000 and one million units this year. The investment should allow for the production of two million devices next year. The company expects to generate US$100 million to US$150 million in revenue this year and between US$200 million and US$300 million in 2025, according to Chi, who said he wants Xreal to go public in the US within two years.

The seven-year-old business now has about 600 employees and is based in Beijing. The company’s Air glasses present notifications, games and video in a wearer’s field of view. Chi said that Xreal’s products have made gains on more costly technology from Magic Leap and Microsoft, which sells a headset called the HoloLens.

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“2023 was a very good year, and the market size pretty much doubled,” Chi said. The company, which said it gets the majority of its sales from Amazon.com’s website, offers AR glasses for as little as a few hundred US dollars. But it believes its latest pair – the Air 2 Ultra – is what will drive future revenue.

“There’s a good chance we can do 50,000 units of Ultra this year,” Chi said, adding that the cheaper models are “definitely easier to sell” and that mass consumers are not seeking as many bells and whistles as what they might get on rival products.

Xreal does not have plans to get into virtual reality – a more immersive technology that’s used in Apple’s new Vision Pro – but Chi believes his company will compete with the iPhone maker in the years to come.

“I think we’re three to five years ahead of them in AR,” Chi said. “They are catching up, though. So we need to keep up and push the boundary.”

During the development of the Vision Pro, Apple also worked on lightweight AR-only glasses similar to what Xreal offers. The company paused work on that device because it did not think the technology was ready yet, Bloomberg News reported last year. Meta and Google have said they are planning their own consumer AR glasses for release in the coming years. BLOOMBERG