Exclusive: Tencent scraps plans for VR hardware as metaverse bet falters – sources

HONG KONG, Feb 17 (Reuters) – Tencent Holdings (0700.HK) is abandoning plans to enterprise into digital actuality {hardware}, as a sobering financial outlook prompts the Chinese language tech large to chop prices and headcount at its metaverse unit, three sources aware of the matter mentioned.

The world’s largest online game writer had formidable plans to construct each digital actuality software program and {hardware} at an “prolonged actuality” XR unit it launched in June final yr, for which it employed almost 300 individuals.

It had give you an idea for a ring-like hand-held sport controller, however difficulties in attaining fast profitability and the big funding wanted to provide a aggressive product had been amongst components that prompted a shift away from that technique, two of the sources mentioned.

One of many sources mentioned the XR undertaking was not anticipated to turn out to be worthwhile till 2027, in accordance with an inside forecast. The second supply mentioned the unit additionally had a scarcity of promising video games and non-gaming purposes.

The sources declined to be named as the knowledge is confidential.

“Below the corporate’s new technique as an entire, it not fairly slot in,” the primary supply mentioned.

Earlier within the yr, Tencent had additionally deliberate to purchase gaming cellphone maker Black Shark, which it believed had provide chain and stock expertise that would beef up its {hardware} push and add 1,000 individuals to the unit.

Nevertheless, it will definitely walked away from that deal on account of Tencent’s shift in technique, in addition to mounting regulatory scrutiny and an anticipated prolonged overview course of, one of many sources who had direct data of the matter mentioned.

The sources mentioned that Tencent had suggested many of the unit’s employees to hunt different alternatives, confirming a Thursday report from Chinese language tech information outlet 36Kr.

Tencent declined to touch upon the Black Shark deal and whether or not Beijing’s scrutiny had soured the deal. Relating to the standing of the XR unit, the corporate referred to a press release to Reuters on Thursday that mentioned it was making changes to some enterprise groups as growth plans for {hardware} had modified.

The corporate additionally mentioned on Thursday that it was not disbanding the XR unit.

Tencent shares slipped as a lot as 2.5% after Reuters’ report.

METAVERSE INTEREST

The launch of the XR unit got here amid swelling world curiosity within the metaverse idea of digital worlds and had marked a uncommon foray into {hardware} for Tencent, which is generally recognized for software program that features a suite of video games and social media purposes.

It additionally entered right into a race towards Western friends corresponding to Meta Platforms (META.O) and Microsoft (MSFT.O), that are constructing their very own metaverses and have their very own digital actuality {hardware} tasks.

One of many sources mentioned that Tencent had dabbled in digital actuality about seven years in the past for a short time, and its curiosity within the space had been revived in 2021 after studying of recent breakthroughs in pancake lenses and extra highly effective shows. Robust gross sales of Meta’s Quest headset was additionally a driver, the particular person added.

However final yr marked one of many hardest years for Tencent since its founding in 1998, with income battered by a regulatory crackdown and headwinds from measures to cease the unfold of COVID-19.

Underlining such strains, its founder Pony Ma in December displayed a uncommon present of frustration at a year-end assembly when he lambasted senior managers for not working onerous sufficient and mentioned the corporate wanted to give attention to brief video for future progress.

A number of tech corporations embrace Meta and Google have introduced layoffs as they search to trim prices amid rising fears of a worldwide recession.

Pico, a digital actuality (VR) headset producer owned by TikTok’s Chinese language developer ByteDance, mentioned on Friday it was laying off a small variety of individuals, after native media reported the beginning of a whole bunch of redundancies earlier this week. A supply aware of the matter mentioned 200 employees had been affected.

Reporting by Josh Ye; writing by Brenda Goh; modifying by Sam Holmes and Sharon Singleton

Our Requirements: The Thomson Reuters Trust Principles.