Siemens Industrial Metaverse

The metaverse was pitched as the next big thing only a few months ago, a new technological frontier where virtually reality and the real world would merge, bringing into life Neal Stephenson’s 1992 novel Snow Crash.

Mark Zuckerberg changed the name of Facebook to Meta in a move that would bet on the future of the metaverse, a term coined in Stephenson’s novel. "I believe the metaverse is the next chapter for the internet, and it’s the next chapter for our company too," CEO Zuckerberg said in 2021 after he rebranded Facebook to Meta.

And he wasn’t the only one.

The World Economic Forum said in January that the metaverse will have a “deep and lasting influence on industry and business“ before it reaches its “full potential in the consumer realm.” Microsoft CEO Satya Nadella joined the chorus, echoing others’ praise for the future of the metaverse.

“We’ve talked about creating this digital representation of the world, but now, we actually have the opportunity to go into that world and participate in it,” Nadella said during his 2021 Microsoft Ignite Keynote address. “I can’t overstate how much of a breakthrough this is.”

Enthusiasm Wanes

But the enthusiasm at Meta and Microsoft for the metaverse has started to wane.

Meta said in its fourth quarter earnings report on February 1 that its Reality Labs division, home to the company’s virtual reality technologies and projects, posted a $4.28 billion operating loss in the fourth quarter, bringing its total loss to $13.7 billion in 2022.

The losses come as Facebook is about to cut another 13% of its workforce. Zuckerberg plans to make 2023 a “year of efficiency” for the company.

Microsoft also appears to be turning its back on the metaverse. The tech giant has reportedly shut down its Industrial Metaverse Core team, known as Project Bonsai, an initiative established to help customers use the metaverse in industrial settings. The Information reported, citing a person with direct knowledge of the matter, that project was officially discontinued.

Microsoft laid off 100 workers from the metaverse team, The Information reported. These were part of a companywide decision in January to slash about 10,000 employees, about 5% of the workforce.

The move away from the metaverse reflects greater uncertainty in the tech sector. The shuttering of Silicon Valley Bank ($SIVB), which has partnered with nearly half of the venture-backed tech and healthcare companies in the United States, has sent fear running through the sector, with its stock plunging amid concerns that it would ripple through the broader US economy.

Too Big, Too Fast

Despite the about-face by Meta and Microsoft, who were once described as vying for control of the metaverse, and potentially brutal fallout from Silicon Valley Bank collapse, Mckinsey said in June 2022 that the metaverse was “too big for companies to ignore” with its potential to generate $5 trillion in value by 2030.

“The metaverse is still being defined, both literally and figuratively,” McKinsey said in its report. “Yet its potential to unleash the next wave of digital disruption seems increasingly clear, with real-life benefits already emerging for early adopting users and companies.

The global metaverse market could reach $936.6 billion by 2023, according to a report by Grand View Research. The market is expected to witness a CAGR of 41.6% from 2023 to 2030, “owing to increasing demand from end-use industries, which prominently include media and entertainment, education, and aerospace and defense is anticipated to propel the industry growth over the forecast period,” Grand View Research said.

The McKinsey survey of more than 3,400 consumers and executives found “significant excitement” about the potential of the metaverse, it said. “Almost 60% of consumers using today’s early version of the metaverse are excited about transitioning everyday activities to it, with connectivity among people the biggest driver, followed by the potential to explore digital worlds,” it said.

The Industrial Metaverse

But Germany’s Siemens is using the metaverse to improve the efficiency of its factories by simulating them with a “digital twin”. The platform, which facilitates the creation of duplicate systems, allows companies to test their production methods, examine product design, and see how it fits the manufacturing capabilities to create a work plan for each process.

The Twin also eliminates the need for “sticky tape,” an old production method of producing, for example, one board, examining it, improving it, and refining the process on one example before finalizing the method.

Siemens' entire factory in Nanjing, China, which manufactures construction materials, was simulated with a digital twin. This optimized the building, and detected and mitigated potential problems at an early stage. Digital process planning increased manufacturing capacity by 200% and productivity by 20% according to the company’s website.

“Digital Twins already combine the real and the digital worlds to quicken the planning of factories, buildings and entire city districts,” the company said. “And by connecting the Digital Twins to their real-world equivalents, by leveraging their data, we can improve operations over the entire life cycle.”