When Pico introduced its Oculus Quest challenger in China last year, it did so with great optimism. Lightweight (295 grams) and affordable ($420), the virtual reality headset launched by the ByteDance-owned manufacturer was expected to drive adoption in a market unreachable for the Meta.
The odds were against Pico. Its sales have been sluggish, and this week Pico, which was acquired by parent company TikTok two years ago, began a new round of layoffs.
This week, Pico held an internal meeting announcing a major reorganization. A person familiar with the matter told TechCrunch that “a few hundred” employees were let go, leaving Pico with “less than 2,000” people.
Even after the layoff, Pico, as it stands today, has significantly more capital than the 200-300 group when it was acquired. The renewal suggests Pico is restructuring to cut costs and pursue more sustainable growth after a period of aggressive expansion.
In a statement, a Pico spokesman said the unit is being restructured to focus more on “hardware and core technologies.”
“We frequently assess our business needs and make adjustments to strengthen our organization and better align our teams with corporate goals,” the spokesperson said.
Frequent reviews are indeed needed at a time when China’s economic recovery after COVID-19 is missing expectations. VR shipments in China to shrink 56% year-on-year in first half of 2023, according to market research firm Counterpoint.
The downturn “marked the end of China’s VR market’s two-year growth streak spanning 2020-2022 and returning to stagnation,” the report said.
The decline is due to several factors. First, Chinese consumers they spend less amid a weakening economy. To deal with the tepid economic recovery, Pico has cut back on marketing investments, leading to a lower shipment target, according to Counterpoint’s analysis.
Another contributing factor is the lack of high-quality VR content needed to increase mass adoption. VR technology is still in the early stages of development, with the hardware awaiting some major developments. At a time when businesses are tightening their belts, it seems logical for Pico to focus on improving its hardware rather than investing heavily in content creation.
Further adding to its sales pressure is that in China, youth gaming – arguably one of VR’s biggest consumer segments – is “highly regulated, with complex content control processes and legally limited screen time,” suggested Gavin Newton- Tanzer, host of mixed reality conference AWE Asia. Regulatory hurdles also “complicated” the Pico’s launch in the US, Newton-Tanzer said.
“Pico has strong fundamentals, but luck and timing conspired against them, so some degree of restructuring was inevitable due to weak consumer sales,” he added.
“While I strongly believe consumer VR in China will have its prime, it just won’t be in 2023. In this context, Pico’s choice to bide its time and focus on hardware makes sense: they will continue to are making progress in the B2B market while keeping options open for another path into the consumer market in the future.”
