Tencent Restructures XR Division, Affected Team Members Receive Two-Month Transition Period

Tencent announced the partial dissolution of its extended reality (XR) team, reported by domestic news portal 36Kr on February 16. According to Tencent, its XR division will be restructured as a result of an overhaul of the company’s hardware development plans. The large Chinese internet and technology company will provide a two-month transitional period for affected employees, who will be given priority for internal transfers and external job recommendations.

In June 2022, Tencent established its XR department in a high-profile manner, aiming to lay a solid foundation for its future metaverse business. Steven Ma, senior vice president of Tencent and leader of its gaming division, headed the XR department. Shen Li, head of NExT Studios, a video game developer under Tencent, led the department’s day to day operations.

Ma said at the 2022 Tencent Games annual conference that the XR business was established to explore opportunities in software, content, systems, SDK, hardware, and other areas. It had hoped to seize new opportunities over the next four to five years and aimed to launch VR products.

However, after just five months, Shen Li left the company in November 2022. Before joining Tencent in 2013, Shen worked for Ubisoft and Epic Games. He ran the Engine Technology Center at Tencent and participated in Tencent‘s VR Project.

At that time, insiders of Tencent‘s NExT Studios said that Shen’s departure would not affect the operations of the studio, the XR business, or other related businesses. However, by the beginning of 2023, news emerged that Tencent had suspended some operations in the XR department.

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According to media outlet Leiphone, an employee who was laid off from Tencent‘s XR division said that Shen’s departure led to the division’s failure. “Shen understood games but didn’t understand or didn’t care about XR. He rarely touched VR devices and only occasionally wore them when listening to reports from employees. In his opinion, VR was just a gaming machine hanging on his face,” said the source.

As of January 2023, there were about 300 employees across nine offices in Tencent‘s XR department. However, there were almost no employees with deep hardware development experience. Tencent had been uncertain about whether to develop hardware.

Tencent had once offered 5 billion yuan ($727 million) in an attempt to acquire PICO, a VR device maker, when the valuation of PICO was only about 2 billion yuan ($290 million). Tencent lost the bid to ByteDance, who had offered 9 billion yuan ($1.3 billion). Since then, Tencent had turned to look for other targets. It had attempted to acquire domestic AR manufacturers Shadow Creator and Black Shark, but failed for various reasons.