The United States has added Tencent, a leading Chinese technology conglomerate, to its list of firms accused of having ties to China’s military. This move has prompted South Korean game developers, many of whom have received investments from Tencent to access the Chinese market, to closely monitor potential ramifications. Industry experts note that given China’s significant share of South Korea’s gaming exports, maintaining ties with Tencent is nearly unavoidable.
On Jan. 6, the U.S. Department of Defense released an updated version of its “Chinese Military Companies” (CMC) list in the Federal Register. The list includes Tencent, Contemporary Amperex Technology Co. (CATL), the world’s largest battery producer; ChangXin Memory Technologies (CXMT), a semiconductor integrated device manufacturer; Autel Robotics, a drone manufacturer; Quectel, an internet connectivity module producer; and China Ocean Shipping (Group) Company (COSCO), a state-owned shipping giant.
Under these sanctions, companies on the list will be prohibited from engaging in transactions with the Department of Defense starting in June 2026. By 2027, the Pentagon will also be barred from procuring goods or services from supply chains involving these firms.
Despite the U.S.’s position as the global gaming market leader, China’s rapid growth, bolstered by its vast domestic user base, has been driven in part by Tencent’s dominance. Beyond its ubiquitous messaging platform WeChat, Tencent has cemented its influence by investing in international tech firms, including Reddit, Snap, and Epic Games, the developer of Fortnite. Tencent also owns Riot Games, the studio behind League of Legends, and Finnish gaming company Supercell.
Analysts anticipate the U.S. sanctions will hinder Tencent’s expansion in the American market as U.S. firms are likely to avoid collaborations. Tech news outlet TechCrunch commented, “Investing in global tech companies has long been a core focus for Tencent. If the company remains on the Chinese military companies list, its ability to pursue investment activities within the U.S. could be significantly curtailed.” The report also noted that “founders may hesitate to accept funding from entities officially linked to the Chinese military.”
South Korean gaming companies are assessing the potential ripple effects of these U.S. sanctions. Since 2020, Tencent has systematically acquired stakes in South Korean gaming firms, largely driven by Chinese regulations requiring foreign game developers to partner with local firms for distribution. Many South Korean developers have forged close ties with Tencent for marketing and distribution in China.
Currently, Tencent holds a 14.61% stake in KRAFTON, one of South Korea’s leading gaming companies, making it the second-largest shareholder. Tencent also owns 17.52% of Netmarble, with Tencent Vice President Piao Yanli serving on its board of directors. In addition, Tencent’s stake in SHIFT UP stands at 40.03%, and its subsidiary, Level Infinite, oversees the global distribution of SHIFT UP’s flagship game, Goddess of Victory: Nikke. Tencent also has representation on the board of Kakao Games.
An industry insider remarked, “The extent of the Pentagon’s sanctions on Chinese tech firms remains uncertain. If strict measures similar to those imposed on manufacturers are applied, South Korean companies could face significant challenges.” However, they added, “As of now, no detailed announcements have been made regarding restrictions on business activities, so the immediate impact on South Korean firms appears minimal.”
Several South Korean gaming companies have already established studios and subsidiaries in the U.S. to bolster their presence. KRAFTON operates its U.S. subsidiary alongside its game studios, Striking Distance Studios and Unknown Worlds. PUBG Studio, the developer of PlayerUnknown’s Battlegrounds, is also based in the U.S. Netmarble’s North American subsidiary Kabam launched King Arthur: Legends Rise in late 2024. SHIFT UP’s Stellar Blade briefly topped U.S. sales charts following its April 2024 release, contributing to the company’s financial growth.
Despite these developments, South Korean gaming companies find it challenging to sever ties with Tencent. According to the White Paper on Korean Games, China accounted for 30.1% of South Korea’s gaming exports in 2022, making it the largest export market for South Korean games. Upcoming titles, including NCSoft’s Blade & Soul 2 and SHIFT UP’s Goddess of Victory: Nikke, are scheduled for release in China this year.
