According to sources inside the company, Tencent Holdings is cancelling plans to move into virtual reality hardware, press agency Reuters reports. The cancellation follows the Chinese tech giant cutting costs and headcount at its metaverse unit. The three inside sources claim that Tencent had difficulties to make the concept for a ring-like hand-held game controller profitable in a short period of time.
Tencent had launched their XR unit only in June of last year for which it hired nearly 300 people. One of their plans was the development of a ring-like hand-held game controller. But according to sources, the unit is already losing its momentum now that hardware plans are cancelled. The company was especially struggling with making the device profitable. A large investment was needed to produce a competitive product.
Tencent walked away from acquisition
Therefore, earlier in the year, Tencent had planned to buy gaming phone maker Black Shark. This acquisition should’ve been a way to create a hardware push and add 1,000 people to the unit. But the company walked away from the acquisition due to a shift in strategy, according to Reuters. According to an internal forecast provided by the sources, the new offer wouldn’t be profitable until 2027.
“Under the company’s new strategy as a whole, it no longer quite fit in,” the first source said. The sources said that Tencent had advised most of the unit’s staff to seek other opportunities, confirming a Thursday report from Chinese tech news outlet 36Kr. In a response, Tencent refers to a Reuters’ statement that said that the company was adjusting some business teams as development plans for hardware were changed.
Not the best year
One of the sources said that Tencent developed their first offer in virtual reality about seven years ago, but it only lasted for a short while. Its interest in the area had been revived in 2021 after learning of new breakthroughs in pancake lenses and more powerful displays. Strong sales of Meta’s Quest headset was also a driver, the source added. However, last year was the toughest year for Tencent since its funding in 1998, due to COVID-19 restrictions.
Underlining such strains, its founder Pony Ma in December displayed a rare show of frustration at a year-end meeting, says Reuters. There he lambasted senior managers for not working hard enough and said the company needed to focus on short video for future growth.
