Let’s Get ‘Phygital’: A $216-Trillion Market Emerges


The growing use of digital twins that converge the physical and digital aspects of an entity is giving rise to a new phygital market.

Operational technology is converging with information technology, extended reality is converging with the world around us, and digital twins are multiplying. The folks at LETA Capital have a word for this convergence of physical and digital: “phygital.” But the venture capital firm doesn’t just see a funny-sounding word, the company sees a $216 trillion market opportunity by the year 2030.

That’s one of the takeaways from LETA’s latest market analysis tracking the implications of the growing fusion of physical and digital worlds, one that will be accessed by 1.4 billion people, which is at least one-sixth of the global population.

The rise of phygital is “a gateway to innovative, immersive, and interconnected experiences spanning a multitude of industries, from fintech to real estate,” the study’s authors write. “All industries can leverage efficiency by becoming more phygital.”

Over the past decade, phygital has witnessed substantial venture capital investments, they continue. This includes more than $20 billion invested in augmented reality (AR), $18 billion in 3D technologies, and $46 billion in Internet of Things (IoT).

The phygital space as the backing of influential players such Microsoft, Apple, Alphabet, Meta, Amazon, and ByteDance, who have already invested $160 billion-plus in phygital space to date. In 2022 the total phygital devices market (such as smartphones, headsets, wearables) was valued at $365 billion, anticipating a tenfold expansion by 2029.

See also: Why Your Digital Twin Will Be Essential in the Metaverse

IT and E-commerce are the sectors with the biggest growth potential, with the focus towards phygital they can reach $34 trillion and $44 trillion market sizes respectively.

Some examples of phygital developments over the past year include the following:

  • 360-degree environment generation: “Sky Blockade Labs elevates AI to an unprecedented level by creating a possibility to craft personalized 360-degree environment, complete with the option to select and tailor various styles for one’s world.”
  • 3D content generation: “OpenAI releases Point-E, an AI that generates 3D models. The text-to-image model was trained on labeled images to understand the associations between words and visual concepts.”
  • AI voice generation: “Voicebox by Meta represents a generative AI model with capabilities spanning audio editing, sampling, and styling. It facilitates the conversion of written messages into personalized voices for the visually impaired, and enabling individuals to articulate foreign languages using their own unique voice.”
  • AI-controlled robots: “Microsoft published a paper on how ChatGPT can streamline the process of programming software commands to control various robots, such as mechanical arms and drones. The research presents design principles for integrating ChatGPT with robotics, including creating high-level APIs, writing prompts for tasks, and using human feedback for refinement.”


About Joe McKendrick

Joe McKendrick is RTInsights Industry Editor and industry analyst focusing on artificial intelligence, digital, cloud and Big Data topics. His work also appears in Forbes an Harvard Business Review. Over the last three years, he served as co-chair for the AI Summit in New York, as well as on the organizing committee for IEEE's International Conferences on Edge Computing. (full bio). Follow him on Twitter @joemckendrick.

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