One of China’s biggest companies is scaling down its metaverse unit as part of its new direction. 

Tencent is partially disbanding its Extended Reality (XR) metaverse unit, according to reports. 

The XR unit was formed in June 2022, and has over 300 staff. Now, members of the unit will need to leave the company or find another position, as Tencent takes on a new strategy. 

The move reflects a sudden change of direction for the Chinese tech giant. It appears that the company is moving away from its strategy to build virtual reality (VR) hardware and software. Instead, Tencent is pursuing a more cost-effective path as part of its new metaverse strategy.

There are multiple reasons for the company’s quick change of direction. According to sources close to Tencent, the company does not believe that the XR project will achieve profitability fast enough. Furthermore, a lack of promising games and non-gaming applications has given the XR project a dim forecast. Hence, the company is scaling down its XR ambitions. 

Currently, Tencent is the world’s largest video games publisher. Additionally, it is one of the world’s most financially valuable companies in terms of market capitalisation. In fact, it owns the application WeChat, which is highly prevalent in Chinese society. 

The company’s XR unit includes augmented reality (AR), virtual reality (VR), and mixed reality (MR). However, the company’s big bet on metaverse technologies appears to have backfired. 

Despite all, Tencent is still very much a key player in the emerging technologies market. Although the company is cutting costs and scaling down its XR plans, it will continue to pursue and leverage Web3 tools. In essence, the company is adjusting to the bleak economical climate, and hedging its bets accordingly – like many other tech giants.

Let’s not forget, Microsoft recently laid off its entire industrial metaverse project team. What is more, Meta’s metaverse division, Reality Labs, lost $13.7 billion in 2022. 

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