(Yicai) Nov. 7 -- ByteDance’s virtual reality arm Pico plans to undergo big headcount changes in its marketing, gaming, and video departments and merge the team behind its mobile operating system into its parent company amid waning global demand for VR products.

The plans are laid out in internal company documents Yicai obtained from Beijing-based Pico today.

ByteDance, which owns TikTok and its Chinese sister app Douyin, acquired Pico in September 2021 amid high hopes for VR headsets. Pico’s staff count quickly rose to 2,000 from 200, with overseas employees accounting for about 30 percent.

But since the start of this year, Pico has laid off 20 percent to 30 percent of its workforce and rumors claim that ByteDance will wind down the unit and give up on the idea of the metaverse.

Pico has patience and a long-term perspective about the extended reality business, a person in charge at the company told Yicai today, adding that its operations will continue as normal after the latest changes.

The market initially had high hopes for VR products as the next iPhone phenomenon, according to Zhuang Minghao, an internet-related investor. But when looking at shipments, product development, and technological progress, these products have not yet reached a satisfactory level, Zhuang noted.

Global VR shipments sank 39 percent in the first half from a year earlier, according to the latest figures. China’s shipments of VR headsets slumped 56 percent, marking the end of a two-year growth period between 2021 and last year.

Against the backdrop of waning demand, many companies in the VR sector have made internal adjustments this year and shifted to a wait-and-see attitude.

In February, Chinese internet giant Tencent Holdings dismissed its team in charge of independently developing extended-reality hardware. In the same month, Microsoft disbanded its industrial metaverse team and laid off 100 staff working on the project. Chinese video platform Kuaishou also suspended its related businesses, and Ma Yingwu, the head of its metaverse business, also left.

Editor: Futura Costaglione