Gaming software developer Unity in talks to spin off China unit

Two sources claimed Unity wanted strategic investors to join a business valued at more than $1 billion

Unity Software Inc, the U.S. developer best known for software used to design video games, is in talks to spin off its China unit to help it expand in the world’s biggest games market, four people with knowledge of the matter told Reuters.

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San Francisco-based Unity has sought strategic investors to join it in a business valued at over $1 billion during talks, said two of the people, declining to be identified as they were not authorised to speak publicly on the matter.

Unity declined to comment. Its share price closed up over 5% on the news on Tuesday.

The talks come as strained Sino-U.S. relations exacerbate sensitivities over technology transfer and data handling across borders, prompting tech firms to reappraise their operations in China. At the same time, there is growing interest in expanding game-making software to new technologies such as the so-called metaverse, an immersive three-dimensional internet.

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 “Honour 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.