• Xreal on Wednesday launched its latest generation of augmented reality (AR) glasses as it looks to fend off competition from the likes of Meta and Snap.
• The Xreal One Series features the X1 chip which is the company's first self-designed processor for its glasses and marks a big step for the product's capabilities.
• Xreal is among the companies that is betting on glasses, rather than large headsets like Apple's Vision Pro or the Meta Quest, to be the mass-market winners in AR.

Xreal on Wednesday launched its latest generation of augmented reality (AR) glasses as it looks to fend off competition from the likes of Meta and Snap.

The company, which is backed by Chinese e-commerce giant Alibaba, is hoping to capitalize on the growing interest in AR glasses.

The Xreal One Series features the X1 chip which is the company's first self-designed processor for its glasses and marks a big step for the product's capabilities.

Xreal talks up the ability for wearers of its glasses to be able to connect to devices such as a phone, laptop or games console, and see their content on a huge digital screen in front of them. The previous generation of Xreal's product required a companion device called the Beam for connections to a device, but the latest chip means that the Beam is not required.

"I think that it's the biggest upgrade in Xreal history and probably the biggest upgrade for the entire consumer AR glasses [sector]," Chi Xu, CEO of Xreal, told CNBC in an interview.

The X1 chip was in the works for three years, Xu said, adding that he sees it as a way to increase the capabilities of the glasses to differentiate from the competition.

"We have to step up to define a chip that is really defining some of the new features for these types of glasses," Xu said.

Xreal is one of the biggest players in the AR glasses space, but it is facing intense competition from the likes of Snap, which unveiled a new set of its Spectacles in September, as well as Facebook parent Meta's continued efforts with the Meta Ray-Ban product. Meanwhile, CNBC reported this year that Qualcomm is working on a set of glasses with Google and Samsung.

Xreal is among the companies that are betting on glasses — rather than large headsets like Apple's Vision Pro or the Meta Quest — to be the mass-market winners in AR.

"People have started to realize a headset doesn't make sense, we need to go to lighter form factors to the glasses category," Xu said. "But the challenge for glasses is can we push the limit to deliver a headset experience on a much smaller form factor?"

The Xreal One and Xreal One Pro start at $499 and $599 respectively.

AR, which refers to a technology that overlays digital content over the real world, has been hyped up over the last few years. However, the market had not exploded like many had predicted. Large headsets have proved too expensive or uncomfortable and firms including Xreal and Meta are focusing on how they can make the experience with glasses more compelling.

There is also still a lack of content and killer use cases for the product, an issue Xu said needs to change before the product category reaches a wider user base. The CEO added that this begins with good hardware.

"We need a platform, we need an ecosystem to improve the experience because we don't have any content yet. But in order to have the developers getting excited ... you need to have good hardware to begin with," Xu told CNBC.

Xu said the company is expecting to sell 500,000 units of its previous products in 2025, roughly doubling the figure of this year.