(Yicai Global) Feb. 17 -- With Tencent Holding winding up its extended reality department and Pico, a virtual reality firm owned by ByteDance, laying off staff, industry insiders believe the initial frenzy over the metaverse is cooling.

Tencent’s XR business will change its development path, and team adjustments will be made accordingly, the Shenzhen-based tech giant told Yicai Global. The personnel changes are mainly based on industry factors, an insider said, adding that Tencent has not given up exploring the XR business but will consider other directions.

Tencent set up the business, which includes immersive technologies such as VR, augmented reality, and mixed reality, in June last year to develop software and hardware for Tencent Interactive Entertainment Group to enter the metaverse field.

The XR business aims to seize opportunities to create industry benchmark-level VR products and experiences in the next four to five years, Tencent Vice President Ma Xiaoyi said at the time.

But the XR industry has been quite unstable recently. Microsoft disbanded its Industrial Metaverse Team four months ago, resulting in 100 employees being let go. Crayta, a Roblox-like metaverse gaming platform owned by Meta, will shut down on March 3.

The actions of different companies in the XR business cannot be directly compared, but the common element is that the irrational fever over the metaverse has gone, Liao Xuhua, a senior analyst at Analysys, told Yicai Global. For example, Microsoft’s HoloLens and Azure digital twin business will continue to operate normally, he noted.

Pico recently carried out a round of layoffs, but the ratio is not high, the person in charge of ByteDance’s VR business said to Yicai Global. Only some parts of the business were involved in the redundancies, which was a standard adjustment and will not affect normal business operations, the person added.

Liao said that last year Pico set too-high a target and gave an over generous marketing budget to a product that lacked strong content support, making it easier to miss the year-end objectives. There is no issue with Pico’s products, and the firm will continue to invest in VR technologies, Liao said.

San Francisco-based AI lab OpenAI recently launched ChatGPT, an AI chatbot that became extremely popular among users and tech firms. Many Chinese companies have also announced plans to enter the AI-generated content field.

Most of the companies that adopted aggressive layouts in the AIGC field can potentially benefit from it in terms of business scenarios and already have advantages in such technologies, according to Lu Guanan, an analyst at Forrester.

Editor: Futura Costaglione