Unity Software Ramps Up Gaming Strategy in Asia with China Unit Spin-Off

Unity Software is reportedly planning to spin off its China unit in order to speed up gaming strategy in the region.
Image source: Unity

Quick take:

  • Unity Software is planning to spin off its China unit according to Reuters sources.
  • The gaming software provider wants to accelerate its gaming strategy in Asia.
  • According to the report, the company wants to zero in on smart city modelling, industrial design, and the metaverse.

Unity Software Inc. (NYSE: U) wants to ramp up its gaming strategy in Asia by spinning off its China unit. Sources close to the matter told Reuters on Tuesday that the San-Francisco, CA-based company wants to expand its footprint in one of the world’s largest gaming markets.

According to two of the sources, Unity’s decision to spin off the unit is driven by the desire to “see its software used more extensively in China in areas as varied as smart city modelling to industrial design, as well as in the metaverse.”

The metaverse is generally described as a 3D virtual space of interconnected worlds where people can immersively interact with each other and participate in experiential activities like gaming and live concerts.

Asia is one of the leading early adopters of the metaverse with several countries including China, South Korea, and most recently Indonesia, drawing up plans to take an early lead in the space.

The reports also come as US relations with China over technology transfers continue to exacerbate, thus causing uncertainty for technology companies with operations in both countries.

Unity has faced strong competition from Sony and Tencent-backed Epic Games, which offers the revolutionary Unreal Engine 5 gaming software to developers around the world. Two sources told Reuters the company has spoken to metaverse-centric investors to back its new investment plan. The report also indicates that the spun-off unit could be worth as much as $1 billion.

Epic Games raised $2 billion in April from Sony and KIRKBI— each investing $1 billion, which valued the global gaming giant at $31.5 billion. Unity has a market cap of about $12.7 billion, which makes the privately-held rival the bigger player in the gaming software space.

Unity’s gaming software has been powering most of China’s video games since entering the market in 2012, however, it has clearly not been as successful as its US segment. 

The company generated $40 million, $64 million and $110 million, in 2018 through 2022, respectively, from the Greater China region. On the other hand, the US division posted $114 million, $151 million and $195 million over the same period, according to Statista. Yet, China is statistically, the world’s largest gaming market.

With the metaverse opportunity increasingly being embraced across the technology divide, mainstream gaming companies are beginning to show an interest in the space. Moreover, venture capital firms continue to bet heavily on the metaverse, which Web3 startups raising $17.5 billion in the first half of 2022.

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