Game Software Firm Unity – A US based company which makes software used to design videogames, is in talks to spin off its China unit, Reuters reported. The talks come as tech companies operating in both the U.S. and China are coming under more political and regulatory pressure from both countries.
In recent years, the U.S. government has stepped up its scrutiny of business operations that could involve technology transfers or data sharing between the U.S. and China. China’s government, meanwhile, has raised concerns about U.S.-listed companies that operate in China, fearing that the U.S. or other governments could gain access to tech companies’ data on Chinese users.
Unity entered China in 2012 and its eponymous software, known as a game engine, powers many of the country’s most popular games such as “Honor of Kings” from gaming leader Tencent Holdings Ltd and miHoYo’s “Genshin Impact”.
Rivals include Tencent-backed Epic Games, the U.S. developer of the increasingly popular Unreal Engine 5.
Unity’s spin-off plan is being driven by a 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, two of the people said. Potential investors Unity has been speaking to have made big bets on the metaverse, they said.
With China tightening data handling regulations, Unity believes a spin-off would aid this expansion as it would give the unit more local ownership and autonomy over how it operates in the country, which could also increase its attraction to local government and state-owned partners, the people said.
The spin-off would be one of China’s bigger technology deals this year as investment activity has slowed due to weak economic growth, COVID-19 outbreaks and regulatory tightening.