Meta Platforms has officially inked a deal with Tencent Holdings to sell a low-cost virtual reality (VR) headset in the Chinese mainland, the Wall Street Journal reported on Thursday last week, citing sources familiar with the matter.
The successful deal will see Meta Platforms return to the Chinese mainland for the first time in 14 years.
In the new deal slated for late 2024, Tencent, one of the largest video game vendors in the world, will receive exclusive sales rights to Chinese buyers.
The Menlo Park-based firm will accommodate the Chinese market by using headset lenses that are cheaper than the ones currently used in the Meta Quest 3, the report noted.
Meta’s cheaper headset will sell in mainland China and other global markets, the WSJ added.
In the formal agreement, Meta Platforms will receive a greater share of device sales and offer Tencent more revenues from content and services. The budget-friendly headset will also include Tencent’s market of apps, games, and other solutions.
Furthermore, the deal comes as Meta competes with the Apple Vision Pro, which is expected to enter markets worldwide early next year. This will help to compete with Apple’s costly mixed reality (MR) head-mounted display (HMD) while retaining its global positioning as the world’s top headset vendor.
US, Chinese Tech Giants Launch Negotiations
The news comes after Meta and Tencent entered talks to sell the former’s Quest lineup of headsets and services in China.
In a separate news piece from the Wall Street Journal, citing unnamed sources, the two tech giants kicked off negotiations in 2022 amid turmoil with the extended reality (XR) market. At the time, the two companies had not reached an agreement on the terms and conditions of their partnership.
Conversations between the two firms also came as Tencent struggled with its metaverse ambitions, leading the company to shutter its XR research and development (R&D) plans.
The Shenzhen-based firm shuttered its metaverse plans, citing profitability issues. According to the company, it would not reach profitability until around 2027, leading to a round of layoffs months after hiring 300 employees.
Furthermore, ByteDance’s VR branch and competitor to Tencent, Pico Interactive, announced it would launch “thousands” of job cuts over the next few months.
According to a post from Tencent Technology News, the layoffs would become “widespread and are expected to affect thousands of employees.”
Due to overinvestments in staff and subsequent decline in profitability last year, the company’s nearly 2,000 workforce would receive reductions of up to 30 percent of its total staff, or “in the hundreds,” it said.
It also noted at last week,
“In mid-October, there were rumors that PICO [had been] abandoned by ByteDance’s strategy. A number of PICO’s internal executives, including Ren Lifeng, PICO’s Vice President and Head of Content and Culture [were] transferred or resigned. News of layoff plans also came out, but this was denied by [ByteDance].”
The news marks a major shift from previous Chinese restrictions imposed on Meta’s family of apps like Facebook, Twitter, and Instagram, due to security concerns in the province of Xinjiang in 2009.
Riots erupted across the region, which Chinese authorities stated had been enabled via Facebook and Twitter.
However, the new deal also signals a thaw in tensions between Washington and Beijing, after the former Trump administration unilaterally imposed tariffs and restrictions on the latter’s technologies, triggering a trade war.
The escalations led to many Western nations banning Huawei from national networks, citing security concerns. In the United Kingdom, the UK Science and Technology Committee later moved to exclude Huawei from national networks, citing concerns over knock-on effects from US sanctions, among others.
Under the current Biden Administration, the US government has pushed to continue former US President Donald Trump’s policy of curbing China’s access to US technologies, namely semiconductors.