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TikTok parent company ByteDance is cutting hundreds of jobs in its gaming division, a person familiar with the matter told CNBC, marking a significant retreat from a segment it has invested billions of dollars in to challenge market leader Tencent.

“We regularly review our businesses and make adjustments to center on long-term strategic growth areas. Following a recent review, we’ve made the difficult decision to restructure our gaming business,” a ByteDance spokesperson told CNBC.

The Chinese tech giant’s main gaming division is called Nuverse. Hundreds of jobs are expected to be cut from this unit, a person familiar with the matter, who was not authorized to speak publicly, told CNBC. Nuverse will not shut down completely but will be significantly scaled back, the person said.

ByteDance has also told employees to stop working on unreleased games, the person said. Reuters first reported the news.

Over the past few years, ByteDance has made an aggressive push into gaming in a bid to challenge other gaming giants like China’s Tencent and NetEase.

ByteDance acquired a major mobile gaming studio called Moonton in 2021 for a reported $4 billion, underscoring its ambitions. The company is now looking to sell Moonton, according to the person who spoke to CNBC.

The retreat comes after a tough couple of years in China’s gaming market which has failed to recapture the heights reached during the peak of the Covid pandemic when people were shut indoors and playing games. The industry has also faced a tough regulatory environment, although that has eased of late.

Success in the gaming sector is hard as it relies on a company creating a steady stream of hits, as well as titles that keep players hooked. Tencent, which is the operator of China’s biggest all-in-one app WeChat, publishes Honor of Kings for example, which is among China’s biggest games.

ByteDance has had some popular releases, for example with Crystal of Atlan, a role-playing action game, but appears to have struggled to turn that into commercial success.

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