Chinese tech giant Tencent Holdings will abandon its plans to develop virtual reality (VR) hardware due to economic pressure and the need to reduce costs and staff numbers in its metaverse division.
The company's XR project, which launched in June 2021, was supposed to develop both VR software and hardware, but has been discontinued due to its unprofitability and lack of competitiveness. Most of the XR division's employees have been asked to look for other opportunities, indicating that the division is no longer part of the company's new strategy.
This decision is a setback for Tencent in the global competition with other tech companies such as Meta Platforms and Microsoft, who are building their own metaverses and have their own virtual reality hardware projects.
Tencent Focuses on Software Instead of Hardware
Tencent's XR division had originally predicted that it would be profitable by 2027. However, the internal forecasts had also pointed out that this would be difficult due to the lack of promising games and non-gaming applications.
The production costs for a competitive hardware were also very high. Therefore, Tencent has changed its development plans for hardware and is now focusing more on software development. Tencent's announcement has also had an impact on the Chinese gaming industry, as the company is the largest and most influential investor in the sector.
Tencent Responds to Regulatory Requirements and Economic Uncertainty
Tencent had already been struggling with regulatory issues and had to abandon some acquisitions and partnerships. In addition, the company has been affected in recent years by economic uncertainty due to the COVID-19 pandemic and a general slowdown in Chinese economic growth. The decision to close the XR division and abandon hardware development is a response to the economic situation and the need to reduce costs. Tencent shares fell by up to 2.5% following the announcement.
