China operators make a play for the metaverse

January 25, 2022 Emerging Markets

The Chinese metaverse is starting to take shape but, as with every other part of the internet, it is going to look quite different from the metaverse everywhere else.

There’s been plenty of investment, though not on the scale of Microsoft’s $75 billion grab for Activision. According to games research firm Gamma Data, investment in the China metaverse last year totaled 25.9 billion yuan (US$4.1 billion) across 209 projects.

The biggest potential deal is Tencent’s 2.7 billion yuan bid for Xiaomi-backed gaming device-maker Black Shark, an attempt by the gaming giant to claim a share of the XR hardware business.

Government oversight?

But right now it’s not clear just how free the tech heavyweights will be in future deal-making. Earlier this week the government set out tighter rules on large tech M&As, limiting their ability to make the acquisitions that powered their growth in the past.

It’s the latest in a series of rules to rein in big tech, and while experts disagree on how far the crackdown will go, this thumb on the scale is seen as providing an opening for the telcos.

The three operators have begun by forming a “metaverse industry committee” – the only one of its kind. It seems to have multiple roles, ranging from R&D to rule-making to possibly creating its own telco-centric ecosystem.

Last week the committee approved its first batch of 65 members, mostly games and XR companies, including eight listed firms.

Another factor is the huge infrastructure base that operators can draw on. Besides their deep 5G networks they have some of the most extensive data center networks in the country, essential in being able to meet the metaverse’s demanding resource needs.

They are also upgrading their computing assets, another critical resource (see China’s telcos join race for computing supremacy).