Tencent halts plans for VR hardware

Tencent Holdings, the world’s largest video game publisher and Chinese tech giant, is discontinuing its efforts to create virtual reality (VR) hardware due to a difficult economic climate. The move follows a company-wide restructuring and cost-cutting initiative that led to significant cuts in its XR unit, which was established to develop extended reality technology. While Tencent had planned to develop both VR hardware and software, it has decided to abandon its hardware efforts and focus solely on VR software after a shift in strategy.

The XR unit was launched in June of last year and has faced profitability issues that were expected to continue until at least 2027. Tencent’s management has advised most of the unit’s employees to seek alternative employment opportunities. The move comes as the Chinese government tightens regulatory oversight, leading to Tencent’s abandonment of plans to acquire gaming phone maker Black Shark earlier this year. Tencent has also had to deal with the economic fallout from the COVID-19 pandemic, with revenue taking a significant hit.

Tencent’s abandonment of its VR hardware ambitions has eliminated it from a crowded field of competitors, including Microsoft and Meta Platforms, which are also developing metaverses and hardware projects. While Tencent is discontinuing its hardware efforts, it still intends to invest in software and metaverse development. Although the project is no longer profitable, the XR unit is not being disbanded. Instead, Tencent has made adjustments to its business teams as it refocuses its development plans on software.