Tencent Holdings, the world's largest video game publisher, is scrapping plans to dabble in virtual reality hardware, as a gloomy economic outlook prompts the Chinese tech giant to cut costs and headcount at its metaverse unit, three sources familiar with the matter said.
The company had ambitious plans to build both virtual reality software and hardware within an "extended reality" unit it launched in June last year, for which it hired nearly 300 people. It had envisioned a ring-shaped portable gamepad concept, but difficulties in quickly turning a profit and the large investment required to release a competitive product were among the factors that prompted a change in strategy, said two of the sources.
One of the sources said the XR project is not expected to become profitable until 2027, according to an internal forecast. The second source said the unit also suffered from a lack of promising games and non-gaming apps.
The sources declined to be named because the information is confidential. They said Tencent had advised most of the unit's staff to look for other opportunities, confirming a Thursday report from Chinese media 36Kr.
The launch of the XR unit came amid growing worldwide interest in the concept of a metaverse of virtual worlds and marked a rare foray into hardware for Tencent, which is best known for software that includes a suite of games and social media apps.
Several tech companies, including Meta and Google, have announced layoffs as they seek to cut costs, fearing a deepening global recession.