Tech giant Tencent Holdings (HKG:0700, OTC:TCEHY) has scrapped plans for virtual reality products and delays have been reported at Apple Inc (NASDAQ:AAPL) as confidence in the future of the metaverse crumbles.
Tencent shelved its metaverse plans as it continues to suffer from a worsening economic outlook in which the company is re-strategising in order to cut costs, a Reuters report said.
The world's largest video game vendor, the Chinese conglomerate started developing both hardware and software technology for VR and hired close to 300 people as part of a new “extended reality” (XR) unit.
One product involved a gaming controller people could wear on their fingers, but the poor profitability and a large amount of funding required led to the company’s strategy shifting away from the metaverse.
Whilst Tencent confirmed it wouldn’t close the XR division, it advised staff in the unit to seek new opportunities – whether these “new opportunities” will be within the company remains to be seen.
In the US, tech giant Apple has also been hit with delays in its metaverse pursuits, affecting development of its headset product that aims to combine both virtual and augmented reality, reports from Bloomberg found.
Rumoured to be called “Reality pro” the wearable technology has been in Apple’s pipeline since 2015 and would be the company’s first product category branch-out since releasing Apple watches eight years ago.
This is the second delay for the product, with Apple initially hoping to release the headset in summer last year, and it's not clear if the delays are deliberate or related to technical problems.
Some tech companies clearly hedged their bets on the success of the metaverse - Facebook’s name change to Meta a case in point.
Yet, the meteoric growth in popularity for AI bolstered by ChatGPT monumental growth could mean metaverse focused companies have been usurped by a new opportunity.
"While we wouldn't necessarily equate Tencent's situation to its western counterparts, we do believe the increased focus on costs spurred by the global macroeconomic downturn is leading to increased scrutiny on projects with uncertain ROIs (and the development of the Metaverse and devices to enable is not clear)," said analysts at Wedbush.
The net effect, they added is that "the cancellation/push-out of development could weigh somewhat on future demand growth for hardware/semis though we wouldn't expect a pullback to impact other areas (ADAS/EV, AI) where growth paths are clearer".