When Pico launched its Oculus Quest challenger in China final yr, it did so with nice optimism. Gentle (295 grams) and inexpensive ($420), the digital actuality headset launched by the ByteDance-owned producer was anticipated to drive adoption in a market inaccessible to Meta.

The chances had been towards Pico. Its gross sales have been sluggish, and this week, Pico, which was acquired by the TikTok mum or dad two years in the past, initiated a recent spherical of layoffs.

This week, Pico held an inside assembly saying a serious reorganization. An individual accustomed to the matter advised TechCrunch that “a couple of hundred” staff had been let go, leaving Pico with “underneath 2,000” individuals.

Even after the layoff, Pico, because it stands at present, has a considerably greater headcount than the group of 200-300 when it was acquired. The shakeup means that Pico is regrouping to slash prices and pursue extra sustainable development after a interval of aggressive growth.

In a press release, a Pico spokesperson stated that the unit was restructuring to focus extra on “{hardware} and core applied sciences.”

“We often assess our enterprise wants and make changes to strengthen our group and higher align our groups with firm objectives,” the spokesperson stated.

Frequent assessments are certainly wanted at a time when China’s post-COVID financial restoration misses expectations. China’s VR shipments shrank by 56% year-over-year within the first half of 2023, in keeping with market analysis agency Counterpoint.

The stoop “marked the top of the Chinese language VR market’s two-year development streak, spanning 2020-2022, and reverting to a state of stagnation,” the report stated.

The decline was attributable to a number of elements. For one, Chinese language shoppers are spending much less amid a weakening financial system. To climate the tepid financial restoration, Pico has scaled again its advertising and marketing investments, resulting in a smaller cargo goal, in keeping with Counterpoint’s evaluation.

One other contributing issue is the shortage of high-quality VR content material that’s wanted to drive mass adoption. VR expertise remains to be in its toddler stage of growth, with {hardware} awaiting some significant developments. At a time when companies are tightening their belt, it solely appears logical for Pico to concentrate on enhancing its {hardware} somewhat than investing closely in content material creation.

Additional including to its gross sales strain is that in China, youth gaming — arguably one of many largest VR shopper classes — is “closely regulated, with difficult content material vetting processes and legally capped display screen time,” recommended Gavin Newton-Tanzer, host of mixed-reality convention AWE Asia. Regulatory limitations additionally “difficult” Pico’s U.S. launch, stated Newton-Tanzer.

“Pico has sturdy fundamentals, however luck and timing conspired towards them, so some extent of restructuring was inevitable attributable to lackluster shopper gross sales,” he added.

“Whereas I firmly imagine shopper VR in China can have its breakout second, it simply gained’t be in 2023. On this context, Pico’s option to bide its time and concentrate on {hardware} is sensible: they’ll proceed to make progress within the B2B market whereas preserving choices open for one more run on the shopper market sooner or later.”