Meta in talks to sell Quest 2 virtual reality headset in China after failing to bring Facebook to the country: report

Meta Platforms is working with Tencent Holdings to sell the Quest 2 VR head to Chinese consumers, according to a report by 36Kr
The collaboration will reportedly follow the set-up of Tencent’s partnership with Nintendo to distribute the Switch in China

Metaverse

Iris Dengin Shenzhen

Published: 7:00am, 22 Feb, 2023

Why you can trust SCMP

Facebook owner Meta Platforms is trying once again to crack the China market, this time through a virtual reality (VR) hardware partnership with Tencent Holdings, according to a report by Chinese technology news outlet 36Kr on Monday.

The Shenzhen-based tech giant’s extended reality (XR) team is working with Meta to bring its Quest 2 VR headset to Chinese consumers at an undetermined date, the report said, citing unidentified sources.

The collaboration, which has been in the works for four months, will follow the set-up of Tencent’s partnership with Japanese video game company Nintendo Co to distribute a localised version of the Switch console in mainland China, the report said.

01:51

Meta opens a physical retail store where customers take a first look at virtual reality

A person with knowledge of the matter, who declined to be identified because the information is not public, confirmed to the South China Morning Post that Meta and Tencent are in initial talks regarding a partnership on Quest 2.

Neither Tencent nor Meta immediately responded to a request for comment on Tuesday.

Some Chinese consumers already had their first taste of the Quest 2, launched globally last October but not officially available in China, when Meta showcased the new headset at the China International Import Expo in Shanghai in November.

A distribution deal with Tencent would allow Meta to make inroads into the Chinese consumer market, which founder and CEO Mark Zuckerberg has long hoped to break into.

Facebook founder Mark Zuckerberg (left) hosts then-Cyberspace Administration minister Lu Wei at the company’s headquarters. Photo: China Network

Efforts by Zuckerberg to endear himself to the Chinese audience included hosting the country’s “internet tsar” Lu Wei on the Facebook campus in 2014, uploading a picture of himself jogging through Beijing’s Tiananmen Square on a smoggy day in 2016, and showing off his Mandarin skills in a speech at the prestigious Tsinghua University in 2015.

Despite those attempts, Facebook remains blocked in China along with other Western internet services such as the Google search engine and YouTube, although it continues to run an advertising business in the country.

In 2019, Zuckerberg criticised China for exporting the values and visions of its tightly-controlled internet to other countries while he defended Facebook’s free speech policies.

Meta, which changed its name from Facebook in 2021 to reflect a sharpened focus on its vision to build a new version of the internet based on shared virtual worlds, bought VR headset maker Oculus in 2014 for US$2 billion.

A giant advertisement in a subway station in Beijing shows a Pico VR headset. Photo: Shutterstock

While Meta Quest 2 is currently the world’s bestselling VR headset, it faces increased competition from ByteDance’s Pico, which held around 15 per cent of the global market in the third quarter of 2022, tripling its share at the beginning of the year, according to data from research firm IDC. Meanwhile, Meta’s share fell to 75 per cent from 90 per cent.

Pico founder Henry Zhou Hongwei was cited by Chinese media last year as saying that the firm, which ByteDance acquired in 2021 for an estimated 5 billion yuan (US$770 million), expected to sell more than 1 million units of its flagship Pico 4 VR headset, launched last September.

Amid a challenging economy, however, Pico is conducting a round of lay-offs expected to affect hundreds of employees, with some teams trimmed by as much as 30 per cent, the Post reported last week.

Also last week, Tencent said it was changing its XR strategy and making adjustments to its team, while denying reports that the company was dissolving the unit. The firm had wanted to acquire Chinese gaming smartphone maker Black Shark, with the intention of pivoting the team to producing VR headsets for metaverse-related content, but it backed out of the deal last year after failing to obtain approval from the government, according to multiple Chinese media reports.

A person familiar with the matter told the Post that Tencent has not given up on its XR business and is exploring various options.