ByteDance’s virtual reality unit Pico pushes new round of job cuts in restructuring move amid falling demand for headsets

Pico founder Henry Zhou Hongwei told employees on Tuesday that the job cuts are being conducted amid sluggish growth in the VR headset market
While the specific size of the job cuts is not known, reports by Chinese local media said lay-offs are expected to affect hundreds of jobs at Pico

ByteDance

Zhou Xin

Published: 8:00pm, 7 Nov 2023

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ByteDance-owned virtual reality (VR) headset maker Pico is conducting a new round of job cuts in line with a restructuring, according to people familiar with the matter, as its sales in mainland China and overseas markets struggle this year.

Pico founder and chief executive Henry Zhou Hongwei told employees on Tuesday that the company must let go of staff because it had been too optimistic about growth in the VR headset market, according to a person briefed on the matter who declined to be named.

The mobile operating system team of Pico will be merged into the product development group at parent ByteDance, where they will focus on research in core technologies and other hardware, according to the person.

While the specific size of the job cuts is not known, reports by Chinese local media said planned lay-offs are expected to affect hundreds of jobs at Pico.

Pico’s virtual reality headset is seen on display at a store inside the Gurney Plaza shopping centre in Penang, Malaysia, on January 9, 2023. Photo: Shutterstock

Pico had already conducted a round of lay-offs earlier this year that affected hundreds of employees, with some teams trimmed by as much as 30 per cent, according to a report in February by the South China Morning Post, which cited two people familiar with the matter.

The latest restructuring effort by Pico underscores another slow year for augmented reality (AR) and VR headset shipments worldwide.

Global AR and VR headset shipments declined for the fourth consecutive quarter, as volumes fell 44.6 per cent year on year during the three months through June, according to a September report by tech research firm IDC. It forecast total AR and VR headset shipments this year to reach 8.5 million units.

Downward pressure from the global economy has curbed demand, while the negative impact of a price increase on the popular Quest 2 headset – developed by Meta Platforms unit Reality Labs –combined with ageing hardware from multiple vendors further hobbled growth in this market, according to IDC.

An attendee wears a Pico 4 virtual reality headset to play a video game inside the Pico booth at the Tokyo Game Show in Chiba, Japan, on September 21, 2023. Photo: Bloomberg

A statement from Pico on Tuesday did not comment on the job cuts, but indicated that the firm will continue to sell its flagship Pico 4 headset and offer services to consumers amid its restructuring initiative.

“We frequently assess our business needs and make adjustments to strengthen our organisation and better align our teams with company goals,” the Pico statement said. “As a result, we have decided to restructure the PICO business to focus more on hardware and core technologies.”

Pico, which was acquired by Beijing-based ByteDance in 2021, launched its Pico 4 headset in 2022. On the mainland, the Pico 4 drew favourable comparisons to Reality Labs’ Quest 2 at a time when gadgets for the metaverse, touted as the next generation of the internet, were being hyped up.

At Pico 4’s launch, company founder Zhou told Chinese media that the company expected to eventually sell more than 1 million units of the headset.

Chinese start-up counts on Apple’s headset to unleash XR demand

The struggles of Pico stand in contrast to Apple’s build-up for its Vision Pro mixed-reality headset, which was launched in June as the US tech giant’s first major new product in a decade. The headset is expected to go on sale in the US early next year, priced at US$3,499.

The timing of the Vision Pro’s release aligns with IDC’s prediction of a rebound in AR and VR headset shipments in 2024, when a 46.8 per cent year-on-year volume growth in the industry is expected.

Meanwhile, Shanghai-based start-up Graphic Design Information Co expects the Vision Pro’s launch to boost adoption of so-called extended-reality headsets, like those being developed by the company and other Chinese firms.

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