TENCENT Holdings is in talks with Meta Platforms to distribute its Meta Quest line of virtual reality (VR) headsets in China, three people familiar with the matter said.

The talks between Tencent and Meta started last year and have continued in recent months, according to one of the sources who has direct knowledge of the matter, adding that the talks remain early stage and details have yet to be agreed.

Tencent and Meta did not immediately respond to requests for comment on Tuesday (Feb 21). The people declined to be identified because the talks are not public.

Chinese media outlet 36Kr and the Wall Street Journal reported the discussions earlier.

Tencent, the world’s largest video game publisher, had ambitious plans to build both virtual reality software and hardware at an “extended reality” XR unit it launched in June last year amid swelling global interest in the metaverse concept of a virtual world.

But Reuters reported last week that it had decided to quit developing its own XR hardware due in part to profitability issues, and told most employees in the unit to find opportunities elsewhere.

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Tencent said at the time it was making adjustments to some business teams as development plans for hardware had changed

One of its main rivals in China’s virtual reality space is TikTok owner ByteDance, which owns headset manufacturer Pico.

Tencent is mostly known for software that includes a suite of games and social media applications. It sells the Nintendo Switch console in China through a partnership with the Japanese gaming firm established four years ago. REUTERS