Two of China's biggest tech giants are working together on one of the hottest emerging areas in mobile entertainment – cloud gaming. Under the collaboration announced at the live-streamed Huawei Developer Conference 2020 on Friday, Huawei Technologies and Tencent Holdings will jointly set up a game development lab exploring the use of cutting-edge technologies such as cloud gaming , artificial intelligence (AI), virtual reality (VR) and augmented reality (AR) in the game industry. One of the key projects will be to tap the computing power of Huawei’s Kunpeng processor to jointly develop Tencent’s GameMatrix cloud gaming platform into an “industry-leading, high-quality and low-cost mobile cloud gaming solution”, Tencent wrote in a post on WeChat. In addition, the lab will work on ways to optimise game engine features, rendering, and power consumption, jointly develop new chip features and debugging tools and apply technologies such as AI, VR and AR to create new gameplay formats, according to the post. Tencent already runs the world's biggest video games business by revenue, but gaming is a relatively new field for telecoms giant Huawei, which has been pushing for its own app ecosystem for its smartphones after being cut off from Google under a US trade ban . China’s Huawei bets US$1.5 billion on computing ecosystem drive “For Tencent, the cooperation on the one hand shows its support of the home-grown Kunpeng industrial ecosystem and on the other hand, gives players using Huawei smartphones access to its cloud games,” said Wen Hao, an analyst form Tianfeng Securities. For Huawei, having more partners join its Kunpeng ecosystem can help the company “reduce the negative impact of overseas sales of its smartphones which have been hurt by the US ban”, Wen added. “The partnership shows Tencent already has access to devices to preload hardware for their cloud games,” Zheng Jintiao, co-founder of media outlet Gamer Boom, said. “Huawei also has to cooperate with more content providers to attract potential customers to its smartphones equipped with its own operating systems,” he added. Cloud gaming, where players stream a game just like they stream a movie, is one of the hottest areas in the industry right now. Instead of a device’s internal memory or removable media such as cartridges or discs, the games run on powerful servers in the cloud. The device sends the commands of game players – run, jump, shoot – over the internet to those servers, while they send video back to the screens. As a result, players do not have to download games and are theoretically not limited by their devices’ processing power. The concept has been around for years in various forms, but the more recent growth of cloud data centres and the roll-out of 5G – with peak data rates up to 100 times faster than 4G – have opened up new possibilities by reducing network latency, one of cloud gaming’s biggest problems. The total addressable size of the global cloud gaming market is predicted to reach US$56.57 billion by 2027, up from US$12.5 billion in 2018, according to a report from research firm Fortune Business Insights. Last year, Tencent opened its cloud gaming platform START for public testing and collaborated with Intel to launch a cloud gaming service called Tencent Instant Play. In June, Huawei also teamed up with NetEase, China’s second-biggest gaming company, to offer a cloud gaming service. Internationally, multiple tech companies have been racing to carve out a place for themselves in this game streaming future, with offerings including Google’s Stadia, Microsoft’s Project xCloud, Nvidia’s GeForce Now and Sony’s PlayStation Now. Purchase the China AI Report 2020 brought to you by SCMP Research and enjoy a 20% discount (original price US$400). This 60-page all new intelligence report gives you first-hand insights and analysis into the latest industry developments and intelligence about China AI. Get exclusive access to our webinars for continuous learning, and interact with China AI executives in live Q&A. Offer valid until 31 March 2020.