August 18, 2022
Unity to spin off China unit in bid to fuel expansion in biggest sportswear market

Unity Software, a US developer best known for the software used to design video games, is in talks to shut down its China unit to help it expand into the world’s largest game market. Four people familiar with the matter told Reuters. San Francisco-based Unity has sought to engage in a business valued at more than $1 billion (about Rs 7,800 crore) during talks with strategic investors, the two people said, who declined to be identified as they would not be speaking publicly. were not authorized. Case.

Ekta declined to comment.

Tensioned Sino-US relations come as talks increase sensitivity over technology transfer and data handling across borders, prompting tech firms to re-evaluate their operations in China. At the same time, there is growing interest in extending game-making software to new technologies such as the so-called metaverse, an immersive three-dimensional Internet.

Unity entered China in 2012 and its namesake software, known as the game engine, honors kings from many of the country’s most popular games, such as gaming leader Tencent and miHoYo’s Genshin Impact.

Rivals include Tencent-backed Epic Games, the US developer of the increasingly popular Unreal Engine 5.

Unity’s spin-off plan is being driven by a desire to see software more widely used in China in areas ranging from smart city modeling to industrial design as well as the Metaverse, the two people said. Potential investor Unity has spoken of making a big bet on the Metaverse, he said.

With China tightening data management rules, Unity believes a spin-off will aid in this expansion as it will give the entity more local ownership and autonomy in how it operates in the country, which It can also increase its attractiveness to local government and state-owned partners. , people said.

The spin-off will be one of China’s big technology deals this year as investment activity has slowed due to weak economic growth, the COVID-19 outbreak and regulatory tightening.

Two people said Unity China’s chief executive Zhang Junbo has been working on the plan for at least a year. He said progress has been slowed by Unity’s share price crashing 80% since its November 2021 high amid weakness in US tech stocks and missing out on product performance expectations.

Zhang revealed Unity’s China expansion ambition last month to local tech media outlet 36Kr without mentioning a spin-off, saying Unity was exploring ways to make its technology “secure and controllable” within China – A reference to the government’s mandate to control critical technology domestically.

He also said that Unity will employ more than a thousand engineers in the coming years, expanding offices in Beijing and Guangzhou in addition to its head office in Shanghai.

Two people said Unity’s Shanghai-based employees have been asked to sign contracts with the new entity, and it is talking about an operating budget different from that of its parent.

© Thomson Reuters 2022

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