Tencent is reportedly bailing on its virtual reality hardware plans. Instead, it advised staff at its XR unit, launched last June to make VR hardware and software in the wake of metaverse hype, to “seek other opportunities.”
“Difficulties in achieving quick profitability,” the size of the investment required to make a competitive VR headset and a lack of compelling games and non-gaming apps were the main reasons for the course change, according to Reuters. Although the company had designed a “ring-like hand-held game controller” concept, it didn’t expect the unit to become profitable until 2027. (Despite the strategy shift, Tencent doesn’t plan to disband the unit.) “Under the company's new strategy as a whole, it no longer quite fit in,” a source said.
In addition, it pulled the plug on a planned deal to buy gaming phone maker Black Shark, which would have added 1,000 more people to the team (after hiring 300 last year). The deal had reportedly drawn scrutiny from the Chinese government.
Company sources said Tencent had “dabbled” in VR around seven years ago when consumer VR hype was arguably at its peak. It regained interest in 2021 after watching the success of the Meta Quest and learning about breakthroughs in pancake lenses and displays. However, 2022 was a challenging year for Tencent as it faced regulatory oversight and the fallout from COVID-19 preventative measures.