(Yicai) Sept. 21 -- The Chinese smart glasses market is diverging, with shipments of audio-only products dropping and those of artificial intelligence and extended reality glasses growing rapidly, boosting demand for components.

Shipments of audio and audio-camera smart glasses in China fell 35 percent to about 332,000 units in the second quarter from a year earlier, according to the latest report by International Data Corporation. Shipments of augmented and virtual reality glasses rose 86 percent to around 279,000 units, with AR glasses deliveries alone up 123 percent, mainly because of higher demand for AI functions.

2026 is the year of AI glasses, a senior industry insider told Yicai. Green AI glasses are expected to hit the market in large volumes in the fourth quarter, pushing ex-factory prices below CNY1,000 (USD149), with retail prices of between CNY1,500 and CNY1,800, making them more affordable.

Moreover, waveguide AI glasses will likely hit the market before the end of the year, which is projected to give a strong boost to the whole industry, the insider noted. Waveguides are optics used in smart glasses that allow the user to see both the real world and projected virtual images.

Upgraded demand is eroding the market share of audio-only smart glasses, which are being replaced by products featuring intelligent interaction, visual perception, and display capabilities, Chen Jun, deputy general manager and chief analyst at Sigmaintell, told Yicai.

AI and AR glasses have become the primary growth driver for the extended reality smart glasses market. Sigmaintell projected that their global shipments will increase about 40 percent this year from last year.

AI-enabled AR glasses are the future direction of the smart glasses industry, Zhang Yi, chief executive officer and chief analyst at iiMedia Research, told Yicai. The transformation and upgrading of the audio glasses segment, which may even require phasing out some production capacity, aligns with market and technological trends.

Shenzhen Magic Treasure Times Technology’s audio glass shipments have declined from their peak, so the company is shifting production capacity toward more intelligent AI and AR glasses, Marketing Director Yang Lei told Yicai.

Magic Treasure Times began manufacturing audio glasses in 2019 and has witnessed the full market lifecycle. The audio glass market peaked between the second half of 2024 and the first half of 2025, when Magic Treasure Times’ daily audio glass shipments hit 5,000 units, and started fading in the second half of 2025.

Sixty percent of Magic Treasure Times’ smart glasses are still audio glasses, while the remaining 40 percent are AI glasses with cameras. The company plans to roll out waveguide AR glasses too.

Audio glasses manufacturers will face a skimming, Yang believes. Some that originated in the Bluetooth headset and smartwatch businesses may return to their original operations or even be eliminated.

Consumer requirements for smart glasses no longer stop at audio functions, as they now also cover display capabilities, Cui Haitao, chairman of Goolton Technology, told Yicai, adding that this benefits upstream suppliers of optical waveguides, micro-displays, and image sensors.

The newest AR glasses adopt the ‘micro light-emitting diode or silicon-based organic LED plus optical waveguide’ architecture, according to Yang. Rising demand for AR glasses has prompted major optical component suppliers to foray into the optical waveguide business.

“Due to an information gap between overseas markets and China, the overseas audio glass market is expected to maintain certain growth momentum in the short term,” Yang said. “But AI and AR glasses will also define the future development direction for overseas markets.”

Over the next two to three years, or even three to five years, smart glasses will gradually emerge as standalone smart devices, ushering in a larger market boom, Yang predicted.

Editors: Tang Shihua, Futura Costaglione