Krafton and Smilegate to Create Synergy in Collaboration and Expansion in China

Possibility of Joint Development and Publishing Between Korean and Chinese Companies
"Krafton and Tencent's 'Big Name' Synergy Expected"
Smilegate Accelerates Efforts for New Hits in China

There is growing interest in whether Krafton and Smilegate, which accompanied President Lee Jae-myung's economic delegation on his state visit to China, will once again make their presence felt in the Chinese market through new hit titles.

President Lee Jae-myung, who is on a state visit to China, is taking a commemorative photo with attendees including businesspeople from both Korea and China at the Korea-China Business Forum held on the 5th at Beijing Zuoer University. Photo by Yonhap News

According to industry sources on January 8, Changhan Kim, CEO of Krafton, and Junho Sung, CEO of Smilegate, attended the Korea-China Business Forum held at Diaoyutai State Guesthouse in Beijing on January 5. There, they sought to lay the groundwork for expanding into the Chinese market and explore new business opportunities.

This forum was the first business exchange event between the two countries' entrepreneurs in nine years, since it was last held under the Moon Jae-in administration in December 2017. Traditionally, economic delegations have been composed mainly of large manufacturing companies. Therefore, the participation of the two game company CEOs is seen as significant, as it indicates that the gaming industry is now recognized as a diplomatic and export industry.

The background to Krafton and Smilegate joining the economic delegation includes their track record of successful game releases in the Chinese market, as well as their cooperative relationships with Tencent. Liu Yong, Vice Chairman of Tencent, also attended the forum.

Tencent is the second-largest shareholder of Krafton and operates the Chinese version of "PUBG Mobile," called "Game for Peace," in China. Due to the "Korean Wave Ban," it became difficult to provide "PUBG Mobile" in China, so Tencent localized the game, which continues to rank among the top in sales.

Smilegate also provides services for "Crossfire" and "Lost Ark" in China through Tencent. In particular, "Crossfire" has become known locally as the nation's leading shooter game, generating over 1 trillion won in annual revenue.

Krafton 'PUBG: Battlegrounds'. Provided by Krafton

Industry insiders expect that, given the two companies' history of major success in China, they will benefit if content exchanges between Korea and China expand. There is speculation that President Lee's visit to China could lead to increased cooperation between companies from both countries, including joint development or publishing projects.

The combination of Krafton and Tencent is seen as advantageous for targeting the global market. Krafton's "PUBG" is a globally popular intellectual property (IP), and Tencent is also widely recognized as a global gaming company, so their collaboration is expected to have a significant impact.

An official from a game company said, "China is generally reluctant to allow foreign IPs to earn money in its market, so it is unlikely that the government will immediately relax the game license (banhao) regulations. However, given the shareholding structure, collaboration between these two companies is not surprising. If these so-called 'big names' join forces, whether they leverage existing IPs or create new games, they will attract attention."

For Smilegate, the entry of currently developing titles such as "Lost Ark Mobile" and "Crossfire 2" into the Chinese market is at stake. Since "Crossfire," there has been no significant revenue from China, making the success of "Lost Ark Mobile," which is targeted for release this year, more important than ever.

Smilegate, which launched an integrated corporation this year, is expected to simplify its decision-making structure and focus its capabilities and resources on targeting the Chinese market. Since Tencent holds the local publishing rights for the original IP, it is anticipated in the industry that subsequent IPs will also go through Tencent if they receive a game license.

Another industry official stated, "It is more difficult to obtain a foreign (waizi) game license than a domestic (bendi) one, so Korean game companies have no choice but to put in extra effort. As the Chinese game market, which used to be labor-intensive, has also grown technologically, collaboration is expected to increase."

Smilegate's Crossfire. Provided by Smilegate