Hong Kong: Tencent Holdings has abandoned plans to expand into virtual reality hardware. The sober economic outlook is forcing China’s tech giants to cut costs and cut jobs in the metaverse division, he said, according to three sources familiar with the matter.
The world’s largest video game publisher has ambitious plans to build both virtual reality software and hardware for its “augmented reality” XR division, which it launched last June, hiring nearly 300 people. Hired.
He came up with the concept of a ring-shaped handheld game controller, but the lack of immediate profitability and the large investment required to produce a competitive product were the factors that prompted him to switch from that strategy. There was one, two of the sources said. Said.
One of the sources said the XR project is not expected to be profitable until 2027, according to internal projections. “Under the new strategy of the company as a whole, it no longer fits perfectly,” said the source. Earlier this year, Tencent acquired gaming phone maker Black Shark to boost its hardware push, also planning to add 1,000 of his people to the unit.
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However, a change in Tencent’s strategy, increased regulatory scrutiny and an expected lengthy review process ultimately led it to walk away from the deal, said a source with direct knowledge of the matter.
Tencent has advised most staff in the division to look for other opportunities, sources said, confirming a report from Chinese tech news outlet 36Kr on Thursday.
Tencent declined to comment on the Black Shark deal and whether Beijing’s scrutiny made the deal worse. He said he was adjusting some business teams because plans had changed.
The company also said on Thursday that it would not disband its XR division.
The establishment of the XR division comes amid growing global interest in the concept of the metaverse of virtual worlds and marks a rare foray into hardware for Tencent, known primarily for its software, including its suite of gaming and social media applications. showed.
It also entered competition with Western peers such as Meta Platforms and Microsoft, which built their own metaverse and had their own virtual reality hardware projects.
Last year was one of Tencent’s most difficult years since its founding in 1998, with earnings hit by headwinds from regulatory crackdowns and measures to contain the spread of COVID-19.
Highlighting such tensions, founder Pony Ma at last December’s year-end conference lashed out at senior management for not working hard, prompting the company to focus on short videos for future growth. He said he needed to, showing a rare expression of frustration.