Tencent takes a key step in the metaverse: it plans to acquire the game mobile phone manufacturer Black Shark

Tencent plans to acquire Black Shark Technology, a gaming mobile phone company. After the acquisition, Black Shark will be merged into the business group led by Tencent’s Chief Operating Officer Ren Yuxin.

Once the transaction is completed, this hardware manufacturer, which mainly focuses on gaming phones, will also usher in a business transformation after the acquisition. According to 36 Krypton, the future business focus of Black Shark Technology will shift from gaming mobile phones to VR devices as a whole—content will be provided by Tencent, and Black Shark will provide VR hardware access.

Black Shark Technology was established in 2017 and was funded by Xiaomi. According to Tianyancha information, “Tianjin Venture Capital Industrial Co., Ltd.”, which is wholly-owned by Xiaomi, is the major shareholder holding 46.4% of Black Shark Technology. Luo Yuzhou, co-founder and current CEO of Black Shark, used to be the vice president of Huawei’s consumer business in China.

Since its establishment, Black Shark Technology has launched several gaming mobile phones. Industry data shows that Black Shark is currently the number one manufacturer in the gaming mobile phone market. For the sake of the “Xiaomi system”, 36Kr learned that this acquisition has also been recognized by Xiaomi’s senior management.

“Black Shark’s valuation is 3 billion yuan, and Tencent has cut it to about 2.6-2.7 billion yuan,” a source said. For this acquisition, 36Kr asked Tencent for verification, and the other party said it would not comment .

From Facebook to ByteDance, it is only a matter of time before Tencent, which is also a social content giant, makes a move in the VR/AR field. In July 2014, Facebook (now known as Meta) acquired Oculus for $2 billion, and the current shipment has exceeded 10 million units. In August 2021, ByteDance acquired Pico for a price of 9 billion yuan.

Since Facebook put forward the concept of “metaverse”, Tencent did not want to miss this huge opportunity. After the release of the third quarter financial report last year, Ma Huateng emphasized in the earnings conference call that the company has a lot of technologies and capabilities to explore and develop the metaverse, which is reflected in the trademark. Previously, Tencent registered the “King Metaverse” and “Tianyuan Universe” one after another. , “QQ Metaverse” and other trademarks.

Earlier, at the end of 2020, Ma Huateng had thrown a well-known concept “full Internet” to the industry. His explanation for this was, “The mobile Internet has developed for ten years and is about to usher in the next wave of upgrades, which we call it. For the True Internet,” defined earlier than the current Metaverse.

Ma Huateng also said that with the promotion of new technologies such as VR, new hardware and software in various scenarios, another major reshuffle is about to begin. Just like the transformation of the mobile Internet, those who cannot get on the boat will gradually fall behind.

With the acquisition of Black Shark, entry into VR, and exploration of hardware entrances, Tencent has once again taken a key step in the layout of the metaverse.

Why did you choose a mobile phone manufacturer to do VR?

In order to develop the metaverse, content-based Internet giants need to find a suitable carrier as an entrance, and VR and AR devices are the most logical choices.

There have been many similar cases. Facebook’s acquisition of Oculus, Byte’s acquisition of Pico, and Snap’s acquisition of WaveOptics are all based on the logic of “content + hardware”. Tencent has no shortage of content and scenes. To quickly fill the hardware gap, acquisition is the most effective way.

Tencent’s sense of urgency is self-evident. 36氪 learned that in the previous acquisition of Pico, Tencent had participated in negotiations as early as March last year, but for various reasons, it chose to give up after Byte joined the bidding. Although the acquisition of Pico failed, Tencent did not give up to continue to shoot other VR and AR projects.

“All AR/VR projects on the market at present have been in contact with Tencent.” A source told 36Kr that the projects that have been contacted include Dapeng, Yingchuang, Xiaopai, HTC, iQiyi Smart, etc. “But Tencent has not yet decided which one to invest in/acquire.”

What is surprising is that Black Shark Technology has no VR background before, why did Tencent choose to acquire such a game mobile phone manufacturer?

Tencent, which is known for its game content, has a high probability of focusing on developing game scenes when it enters VR. Compared with professional VR startups such as Pico, the advantage of Black Shark is that it has enough game know-how and has accumulated a certain amount of experience in heavy gamers and game adaptation. On the other hand, VR devices still cannot escape Qualcomm chips. In the past four years, Black Shark has also had enough experience in cooperation with Qualcomm, as well as experience in subsequent optimization and adjustment of the chip platform.

There is no basis for cooperation between Tencent and Black Shark. In January 2020, Tencent Games and Black Shark announced a strategic partnership and launched Tencent Black Shark Gaming Phone 3.

However, compared with professional VR teams, mobile phone manufacturers are slightly lacking in VR algorithms and technologies – but according to industry insiders, it is not difficult for mobile phone manufacturers to make up for this shortcoming.

At present, there are already mature supplier technical solutions in the domestic VR industry chain. Some industry insiders said, “To launch a complete VR product, a team of hundreds of people can do it with tens of millions of dollars.”

A person familiar with the Black Shark team said that the Black Shark team is mainly composed of research and development, and most of them come from mobile phone companies such as Coolpad and Huawei. “. After integrating into the Tencent system, an important task of Black Shark is how to increase the manpower to develop VR equipment and make up for these technical shortcomings.

Inside the Black Shark, this work has already begun. According to 36 Krypton, the Black Shark team has already started to conduct in-depth exploration of the VR business as early as the end of last year. “We are looking for people everywhere to talk about how to make VR equipment”, many industry professionals told 36 Krypton.

Tencent takes a key step in the metaverse: it plans to acquire the game mobile phone manufacturer Black Shark

Luo Yuzhou, CEO of Black Shark Technology 

Why does Xiaomi want to sell the Black Shark?

Transforming VR is indeed a strategic decision that Black Shark has to make.

In the Xiaomi system, the positioning of the three independent mobile phone brands is: Xiaomi is responsible for high-end, Redmi is responsible for the mid-to-low-end field, and Black Shark focuses on the gaming mobile phone market segment.

However, the gaming mobile phone market where Black Shark is located does not seem to be as broad as initially imagined. The three major domestic game mobile phone manufacturers have entered the game since 2017, and have not really opened up the game mobile phone market. The domestic mobile game user market is about 700 million, but game mobile phones have always been small . The total shipment in 2020 is only about 1.6 million. Volkswagen mobile phones are often a fraction of the hundreds of millions of shipments.

Still, gaming phones face stiff competition. Vivo’s sub-brand iqoo, realme and OnePlus of the Oga series, and even Redmi, which is also a Xiaomi series, are all making mobile phones with the main game functions.

Based on various objective circumstances, 36 Krypton learned that Black Shark has considered transforming from a small and beautiful to a mass mobile phone earlier, and implemented it at the product level.

However, whether this product plan will be implemented next is still inconclusive. But obviously, under the metaverse trend, VR games are a more imaginative hardware direction than gaming phones. Before being acquired by Tencent, as early as early 2021, Black Shark had released financing needs, and a number of investors had already conducted due diligence.

In addition to its own business considerations, the subtle changes in the relationship with Xiaomi may also be the key reason why Black Shark is considering breaking away from the Xiaomi system.

The turning point in the relationship between the Black Shark and Xiaomi happened last year. In April last year, Redmi released the K40 game enhanced version, which is a mobile phone that focuses on game scenarios.

An industry source told 36氪 that Redmi’s original plan was to establish a separate gaming phone series, but this idea was internally opposed by Black Shark.

“In the end, the trouble came to Lei Jun. There were two camps in Xiaomi. Lu Weibing wanted to make his own (game phone), but some executives supported Black Shark,” a number of people familiar with the matter told 36氪. The end result is that Redmi made a compromise and just integrated this gaming phone into the K40 series and released it as a variant.

In the case of Xiaomi’s strong attack on high-end, Redmi’s display space is obvious, and it can only expand horizontally to cost-effective gaming phones. Black Shark is separated from the Xiaomi system this time, which is also a “relief” for Redmi to a certain extent.

In general, if Tencent’s acquisition of Black Shark is finally completed, in the Xiaomi system, this is a mutually fulfilling decision; between Tencent and Black Shark, since the acquisition price is almost only one-third of the previous price of Pico (9 billion yuan) First, for Tencent, this is actually a cost-effective acquisition, and each takes what he needs.

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