Reality Check: US Investment in XR Technologies Long Overdue

Joan O'Hara / Jan 4, 2024

Joan O’Hara is Senior Vice President of Public Policy for the XR Association and Co-author of Reality Check: Why the U.S. Government Should Nurture XR Development.

With both the United States Congress and the Biden administration focused on AI regulation, it’s easy to imagine that securing critical funding to support the research and development of immersive technologies has likely taken a backseat.

While AI is at the top of today’s priority list, the US cannot afford to fall behind in facilitating the growth of immersive technologies as an integral component of its strategic vision. Immersive technologies are driving economic growth, upskilling the workforce, creating new jobs and leading to better health outcomes by delivering cutting-edge therapies and advanced training opportunities. This technology has been designated critical by the National Science and Technology Council and the Department of Defense (DoD) because of its importance to national security and the economy. XR will help the US address some of its most critical strategic challenges, including industrial productivity, workforce development, education and opportunity, and environmental sustainability.

Failing to maintain US leadership and invest in immersive technology could result in another nation stepping in as the global leader of a nearly $30 billion market that includes augmented reality (AR), virtual reality (VR), and mixed reality (MR), collectively referred to as extended reality (XR). XR technology is transforming the way we learn, work, and interact and is poised to be the next major computing platform.

Just this year, the leaders of the world’s largest economies, the G7, issued a Leaders’ Communique recognizing the impact of XR technology and the metaverse “in all industrial and societal sectors.” The communique called for issues related to “governance, public safety, and human rights challenges” to be addressed at the global level.

Immersive technology continues to be a focus of several US tech companies such as Meta, Magic Leap, Apple, and Unity, who are investing heavily in XR. Just this year, Apple announced its first venture into the mixed reality space. In addition to this private sector investment, lawmakers on both sides of the aisle have recognized the potential of XR, including in the CHIPS and Science Act, which designated immersive technology as a key focus area for the National Institute of Standards and Technology (NIST) and the National Science Foundation (NSF), making it eligible to receive part of a $280B research and development fund.

However, two years after the passage of the CHIPS Act, the US has not put forward a vision for XR, despite its importance to the economy and national security. A new report by the XR Association and George Washington University’s Digital Trade and Data Governance Hub found that, in contrast to other nations, the US still has done little to target research and development support to XR specifically.

China stands in stark contrast to the US in this regard. Officials there designated immersive technologies as one of the “7 key industries of the Digital Economy,” and have demonstrated their commitment and ability to subsidize, nurture, and govern data-driven technologies. The International Data Corporation predicts China will capture 25% of the global XR market by 2026, with a compound annual growth rate of 42.2% over the next five years.

Similarly, South Korea has implemented its Digital New Deal initiative to nurture the "hyper-connected and immersive emerging industries which will lead the digital future" and support Korean businesses to "go global" with innovative digital products and services. And in the EU, the European Commission (EC) recently announced an investment of more than $10 billion in funding for critical technologies, including virtual reality, as part of its Strategic Technologies for Europe Platform (STEP). The UK and France have also developed strategies and policies to nurture XR and put in place the building blocks of the metaverse.

While the US has a framework to advance its leadership in immersive technologies, there are fundamental challenges that must be addressed to remain a leader in XR. One of the biggest challenges is a $7.5 billion funding gap for research agencies working to develop and invest in new immersive and emerging technologies. As governing bodies seek to catch up to a rapidly evolving tech landscape, federal funding for US research institutions like NSF and NIST becomes even more critical.

For example, the Biden-Harris administration’s Safe, Secure, and Trustworthy Artificial Intelligence Executive Order prioritized federal support for accelerating the development and use of privacy-preserving techniques, creating more unfunded mandates for NSF and NIST.

Beyond the need for funding, we’ve outlined several recommendations for Congress in order to maintain America's position as a global technology leader and leverage the transformative economic, security, and societal benefits of XR.

This includes developing a comprehensive national strategy on immersive technology, passing a comprehensive federal data protection law, and fully funding federal XR research and development. Additionally, the Department of State should host a global summit on XR demonstrating US leadership and fostering further debate and cooperation around complementary regulatory and governance frameworks that ensure XR technology reflects democratic values.

Technology does not move at the speed of government, and the US must recognize that other nations are moving assertively to secure their positions in the immersive technology sector. Failure to act could set the US back and have an immense impact on our industrial sectors, manufacturers, educators, and healthcare practitioners alike.


Joan O'Hara
Joan O’Hara is Senior Vice President of Public Policy for the XR Association and Co-author of Reality Check: Why the U.S. Government Should Nurture XR Development.