Published on: 21/02/2023

Tencent looking to bring Meta VR tech to China, report says

In a recent report, Chinese media outlet 36 Krypton said that Tencent might partner with Meta to distribute Meta Quest 2 VR devices in China.

Previously on February 16, sources reported that Tencent was backing away from its metaverse and virtual reality (VR) ventures.

The company’s plans for the XR unit, an extensive virtual reality software and hardware, had allegedly been put on hold indefinitely. The XR department hosted over 300 employees before Tencent pulled the plug on the project.

“Under the company’s new strategy as a whole, it no longer quite fit in,” an anonymous insider source said.

Tencent’s original plan for the XR unit would have featured a hand-held game controller in the shape of a ring. However, competition from both Meta and various other game companies forced it to reconsider its initial production strategy.

According to an anonymous insider source, Tencent was certain that the XR unit would not make a profit for nearly half a decade if it were produced. While competition played a vital part, the unit also suffered from a lack of games and applications for consumers.

Tencent also canceled plans to acquire gaming phone manufacturer Black Shark. According to reports, the company believed the manufacturer could upgrade its hardware and employ more than 1,000 people to the XR unit’s development.

Despite backtracking on its own VR project, 36 Krypton suggests Tencent is still interested in collaborating with the formerly-Facebook Meta by other means.

Similarly to its deal with Nintendo for the Nintendo Switch, Tencent may instead act as a distributor for Meta’s existing Meta Quest 2 hardware. The Chinese tech giant may correspond with Chinese regulations and policies to sell the product to the country’s citizens.

Tech experts noted that Meta might welcome the cooperation after a series of downturns last year. The company suffered a loss of $700 billion since turning its focus to VR and metaverse experiences.

Bypassing restrictions

Despite having one of the biggest markets in the world, Chinese restrictions severely limit technology industries entering the country. To succeed, foreign companies must establish a Chinese subsidiary or work with a local company to pass through the regulations.

Tencent has acted as a middleman for other companies, including the Japanese game company Nintendo. Tencent is currently Nintendo’s distributor for Switch devices, running its games through Chinese regulations and servicing customers on the game company’s behalf.

36 Krypton’s report hints that Tencent is discussing the same deal with Meta, specifically for the company’s Meta Quest 2 VR headsets.

Meta’s VR headset sales have decreased by two percent year-on-year, selling only $1.1 billion worth of headsets in December 2022. However, those numbers are only for the United States, and Meta has yet to expand to China due to the country’s restrictions.

The company also faces competition from Pico 4, the Chinese VR headset alternative to Meta Quest. Though Pico 4 is a decent replacement, it also has less support than Meta Quest 2. For example, it does not have much native software to offer users.