Alibaba, China Mobile, Oppo, other tech firms back new US$1 billion joint venture with US video game engine provider Unity

Joint venture Unity China will initially build customised local versions of the US software firm’s core products for domestic video game developers
Unity’s cross-platform game engine was used to develop top-grossing titles such as miHoYo’s Genshin Impact and Tencent Holdings’ Honour of Kings

Video gaming

Ann Caoin Shanghai

Published: 8:30pm, 10 Aug 2022

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China’s video gaming market, the world’s largest, could be poised for a creative kick-start amid a tougher regulatory environment, as a number of tech heavyweights rally behind a new venture by US game engine provider Unity Technologies.

The local investors in the regional joint venture Unity China include e-commerce giant and South China Morning Post parent Alibaba Group Holding, ByteDance-owned Chinese short video service provider Douyin, telecommunications network operator China Mobile, Android smartphone maker Oppo, hit game Genshin Impact creator miHoYo, online games developer G-bits Network Technology and artificial intelligence firm PCI Technology Group, according to a statement posted on Unity’s official WeChat account on Tuesday. Financial terms were not disclosed.

This initiative will enable Unity to not only increase competition with larger rival Epic Games in China, but tap new opportunities in the nascent metaverse market, where it has an advantage in the virtual reality (VR) and augmented reality (AR) fields, said Zhang Shule, an analyst at Beijing-based research institute Kandong.

Unity China, which is valued at US$1 billion, will initially build customised local versions of the firm’s core products for the country’s video game developers, according to a statement published on Tuesday in the San Francisco-based company’s website. The Unity cross-platform game engine was used to develop top-grossing titles such as Genshin Impact and Tencent Holdings’ Honour of Kings.

Video game software development company Unity Technologies, formally known as Unity Software, established its first China office in Shanghai in April 2012. Photo: Shutterstock

“Unity believes that China’s gaming industry will still have broad growth in the future, and gaming technology will undoubtedly continue to lead the development of real-time 3D engines, which will also promote the development of other industries,” Zhang Junbo, Unity China’s president and chief executive, told the South China Morning Post.

“In China, many game developers and manufacturers are important customers and platform partners, and we will work with them to build efficient and easy-to-use [real-time 3D] engines.”

Unity has majority ownership and control of the joint venture, which will operate solely within the Greater China region and be overseen by a board of directors composed of Unity executives and major investors.

The backing received by Unity China from a number of Big Tech companies reflects the increased interest by these entities in helping to expand the country’s video gaming industry.

Global hit video game Genshin Impact, created by Shanghai-based miHoYo, was developed using the cross-platform game engine Unity. Photo: Shutterstock

While titles from major Chinese developers continue to dominate the world’s mobile game rankings, tightened industry regulation and slowing economic growth on the mainland are dampening expansion in the domestic video gaming market.

“For the joint venture’s big investors, such as Alibaba, Douyin and China Mobile, they’ve tried to compete in the video gaming industry, but have failed,” Kandong analyst Zhang said. “[Unity China] could serve as a bridge for them to join hands with small and medium-sized local game companies to challenge Tencent.”

At the end of 2020, China’s top 20 video game developers by revenue – including Tencent – had adopted Unity’s game engine and other software tools, according to the company’s data.

Shenzhen-based Tencent, which operates the world’s largest video gaming business by revenue, remains China’s No 1 game developer and publisher, ahead of main rival NetEase. Tencent also has a substantial stake in Epic Games, whose Unreal Engine 3D computer graphics game engine directly competes with Unity’s own cross-platform engine.

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Epic Games completed in April a new funding round that helped it raise US$2 billion to advance its vision to build and support the growth of the metaverse. In the same month, Xiamen-based game engine provider Cocos Technologies raised US$50 million from its Series B financing round.

In July, Unity’s Zhang said the company is also eyeing the growing applications of the metaverse in China.

The metaverse refers to an immersive virtual world, where digital representations of people can interact with each other like they do in real life. VR and AR technologies are regarded as fundamental to the development of the metaverse, which is also considered as the next iteration of the internet.

“We have also received a lot of demand from non-gaming fields,” the Unity China chief executive said on Wednesday. “As the leading real-time 3D engine, Unity has begun to actively expand these application scenarios.” He said these fields include manufacturing, e-commerce, smart city development and tourism.

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