The rise of the East: why Chinese and Korean AAA games are breaking through now
By Strategy team. Top image: Black Myth: Wukong by Game Science
Two of the biggest gaming markets in the world have made relatively little impact upon the West to date. That’s about to change.
Black Myth: Wukong is one of the biggest games of the year. A new wave of Chinese and South Korean AAA titles turned heads at this summer’s major gaming events. Steam’s Wishlist Top 20 is currently one fifth occupied by games from those two rising powers.
After years of making quiet inroads into Western markets, are Chinese and South Korean AAA titles reaching a tipping point? Are we entering an exciting new era of cross-cultural influence in the industry as a fresh crop of East Asian game producers become household names over here?
We think so, and here’s why…
World power rankings
The sheer size of the Chinese and Korean games markets is one reason to believe their global influence can only grow:
Source: Top countries by videogame revenues, Newzoo.
Some analysts state that China has already surpassed the US as the world’s biggest market, and at least by player numbers it is no contest. Meanwhile, South Korea’s revenues outstrip every country in the West bar the US.
In other words, both markets are easily big enough to support a strong domestic games industry. Ambitious firms will always seek opportunities to expand their markets abroad - an imperative that’s only sharpened by structural challenges at home.
In the Chinese case, major publishers such as Tencent, NetEase, and MiHoYo have been investing in satellite operations in North America, Europe, Japan, South Korea, and other Southeast Asian countries. The unpredictable nature of governmental regulation in China is one significant motivation.
Meanwhile, South Korean firms are limited by a domestic market smaller than the UK’s or France’s by player numbers. Creating games that appeal to a globalized audience is their best chance to escape that natural constraint on growth.
Cultural borders are porous
The go-to theory for why Chinese and Korean games haven’t caught on in the West is, “cultural barriers.”
The story goes that Western gamers aren’t inspired by unfamiliar cultural reference points like Chinese history, settings, deities, and lore.
Moreover, some believe there is a philosophical divide between Eastern and Western mindsets that is hard to bridge. For example, it is commonly claimed that Western games are about individual heroes whereas Eastern games portray collective struggle.
None of which explains why Japanese games are so popular in the West.
How could a country - separated from the US and Europe by a cultural chasm - produce so many titles that are integral to the Western gaming experience?
To cut a long story short, the videogame crash of 1983 destroyed Atari’s and therefore the US’s early lead in the global console hardware market.
The vacuum was filled by Nintendo, Sega, and later Sony, who battled for the right to plug their consoles into the world’s TVs.
With US investors burned, Japanese dominance of the space wasn’t seriously contested by an American competitor for almost twenty years, until Microsoft launched Xbox in 2001.
In the intervening years, Japanese console vendors exported the pick of their homegrown titles - and Western gamers loved them. (This was not an outlandish bet. Westerners had been playing Japanese games in the arcades for years, afterall.)
Why weren’t the likes of the Super Mario titles, the Final Fantasy series, and Metal Gear Solid throttled by Western unfamiliarity with Japanese cultural references?
Because those landmark Japanese properties were fundamentally brilliant gaming experiences.
Because the mechanics of games and the language of play are more universal than the content of other entertainment media. Think how much easier it is for gaming experiences to cross borders than it is for TV shows, movies, or literature.
Because Japanese developers and publishers were at least as capable and well financed as their Western counterparts. Crucially, they had the talent, technology, and backing to produce premium games for every console generation. They could invest in localizing and marketing their titles effectively to Western audiences.
In short, cultural barriers fall away in the face of awesome gaming experiences.
Arrested development
Korean and Chinese firms were late to the videogame party. Partly that was a function of financial firepower.
Chinese GDP only overtook the UK’s in 2006. But in GDP per capita terms, China still lags far behind the West, while South Korea is now within touching distance of Japan:
Source: GDP per capita, The World Bank.
Back in the 1990s, as South Korean incomes took off, the fledgling domestic games industry was waylaid by the economic contraction caused by the 1997 Asian Financial Crisis.
Many Korean games firms went bankrupt in the recession, and the survivors were financially crippled.
Piracy flourished in the bleak aftermath of the crisis. At the same time, because they could not afford the upfront cost of premium titles, millions of Koreans got their gaming hit from “PC bangs”. These uniquely Korean Internet cafes took advantage of the country’s early investment in broadband infrastructure to offer cheap, high-end PC gaming.
It was PC bang culture that fostered Koreans' love of esports, nurtured early MMORPGs (Lineage and Ragnarök Online), and led to the popularization of the free-to-play model (Maple Story).
The point being that when Western and Japanese firms were conquering the main niches that comprise today’s gaming ecosystem, Korean firms were still in the crib and comparatively years behind.
Naturally, Korean gamers wanted to play the best games, and that mostly meant foreign imports.
As the country’s gaming culture evolved, domestic firms could only gain a foothold and compete in a few underdeveloped niches.
It takes financial muscle, years of work, and the ability to scale up from an initial bridgehead to contest markets when established firms can draw upon a deep pool of talent and investment capital.
We can see how hard it is to undo an embedded lead by examining the dominant esports titles in South Korea.
Despite the early popularity of esports in Korea, of the country’s top ten esports games, only PUBG originated in Korea:
Leading esports games in South Korea (2024)
Source: Leading esports games in South Korea (2024), Statista.
PUBG is Korean because a Seoul-based games developer spotted and nurtured the potential of the emerging battle royale genre well before anyone had even thought of Fortnite.
The rest of the top ten is dominated by shooters, real-time strategy (RTS) games, and the MOBA offshoot of RTS. Those genres were popularized by US game producers and the principal IPs are still in US hands today. (Tencent’s acquisition of Californian studio, Riot Games, notwithstanding.)
One explanation is the Cluster Effect which posits that geographic hubs of expertise can lead to enduring competitive advantages - witness Silicon Valley, Hollywood, or the City of London.
Clearly, Koreans don’t care which cultural tradition those titles are rooted in. They just want to play the biggest games. Meanwhile, Korean firms have historically lacked the capacity to compete in the main esport genres - even in their home market - except when they were instrumental in creating that genre in the first place.
Globally successful IPs make for formidable moats that protect the companies that own them. Wide moats are hard to erode but competitors can cross them given enough time, capital, vision, and determination.
Thus Korean publishers have built their strength in areas where they can compete, and then gradually expanded the scope of their ambitions outwards.
Hence a country thought of in the West as the home of grindfest MMORPGs is now making waves with highly anticipated AAA games such as the soulslike The First Berserker: Khazan and The Sims challenger, Inzoi.
The sleeping giant awakes
A similar catchup story holds true for Chinese code shops and publishers. Consoles were banned in the country between 2000 and 2015. PC ownership was restrained by low incomes, hence domestic producers majored in mobile games development as smartphone ownership exploded.
Chinese publishers (along with their Korean counterparts) did not face insurmountable economic moats when competing with Western and Japanese rivals in the mobile space.
Hence the Chinese majors carved out a substantial share of the North American and European mobile markets, becoming adept at localizing their offerings for each territory.
Meanwhile, the premium games market has grown in China, fueled by rising disposable incomes and the end of console prohibition.
But among the various curbs placed upon Chinese gaming is a licensing system that artificially caps the number of titles released per year:
Source: Games approved in China per year vs released on Steam, Konvoy.
The mustard coloured bars show the number of games licensed for release in China annually. We can see how restrictive the system is by comparing that figure against the number of games released on Steam per year (black bars). The number of games approved in 2023 was 1,076.
This system is credited with hastening Chinese publisher moves into the AAA sector. Each firm knows they will only be granted a limited number of licenses per year. Hence they’re driven up the value chain into the most profitable segments of the ecosystem.
And of course, constraints at home cause Chinese game producers to focus on the export potential of their release slate.
Simultaneously, Chinese studios have sharpened their AAA skills:
Firstly, due to the burgeoning appetite for premium games among the domestic audience, served by ambitious creatives keen to prove themselves beyond mobile gaming.
Secondly, thanks to the return of key figures reshoring experience gained in major overseas studios.
Thirdly, because of regular outsourcing by established players such as EA and Microsoft, seeking to utilize lower cost Chinese tech workers.
Fourthly, as a result of console scouting and incubation programs. Sony initiated their “China Hero Project” in 2017, while Microsoft followed suit in 2022.
Some of the Chinese games benefiting from Sony’s incubation project.
The snowball effect of these social and commercial forces led to Genshin Impact’s 2020 breakout success in the West.
That’s been followed by titles such as Honkai: Star Rail, Naraka: Bladepoint, and now Black Myth: Wukong.
What links these games, apart from their Chinese origins, is commanding AAA development and marketing budgets, premium production values, typically good or great review scores, and an intriguing blend of new and familiar ideas that enabled each title to find its audience, both East and West.
Going global
Naturally, not every game that’s a hit in China or South Korea is destined to make a splash in the West. Local preferences and habits do count for something. There’s a reason EA Sports FC is big in Europe, MLB The Show not so much.
But culture is infectious and resistance to it is variable. Local pastimes and artforms can spread across the world and win a global audience.
Perhaps the most significant example of cultural transmission that affects gaming is the rise of anime - which is now huge among Gen Z consumers, whether they hail from East or West.
Gen Z are much more interested in anime content than older consumers. Source: Parrot Analytics.
Japan’s anime aesthetic originally transferred to videogames as local creatives migrated into games production from the animated film industry.
This dynamic was compounded by the pioneering use of the transmedia model in Japan. Under-resourced Japanese entertainment firms spread the risk of IP development across production partners responsible for cartoons, comics, trading cards, and toys. Gaming spin-offs were a natural extension of this strategy.
Meanwhile, demand for anime content in the West grew from cross-pollinating subcultures adhering to manga comics, animated films, and most importantly games.
Fascination with these media naturally prompted interest and participation in related streams of Japanese culture such as cosplay and trading cards.
That interconnected web of fandom was boosted by gatekeeper brands' openness to UGC, contributing to the diffusion of anime via community channels.
Today, the cultural currency of anime can be traced via rap lyric references, streetwear brand collaborations, influencer follower counts, and Netflix content investment.
BAIT x Reebok x Astro Boy brand collaboration.
The US is now the largest market for anime TV content outside of Japan.
And a glance at Chinese and Korean games confirms that those countries succumbed to the allure of anime, too.
In sum, the anime phenomenon offers a ubiquitous visual vocabulary for Asian titles with global ambitions.
Of course it takes more than a coat of anime for a game to prosper around the world. But Western and Eastern gamers share much more than that.
Genshin Impact: a model for cultural fusion
Genshin Impact in particular succeeded with gorgeous anime-inspired visuals reinforced by a smart blend of design choices that helped it thrive in the West:
An engrossing yet accessible open-world environment.
Deep RPG character development.
Zelda-esque design influences.
A captivating setting and lore rooted in vivid Chinese mythology.
Compelling twists on familiar and enjoyable gameplay loops.
Superb localization.
Non-reliance on gacha mechanics that are unpopular in the West.
While obviously you can’t dial up a list of ingredients and output a global blockbuster, it is clearly possible to pick a promising game from your development roster and build an enthralling experience slanted towards a broad audience.
Moreover, gamers the world over enjoy novel experiences. To that extent, Westerners' relative unfamiliarity with Chinese and Korean cultural reference points is an engagement plus, not a weakness, when those touchstones are wrapped around the core of a quality title.
Capability not culture is decisive
In retrospect, the localization issues and niche appeal of an earlier generation of Chinese and Korean titles can be seen as the teething problems associated with expansion into new markets.
Few firms in any industry get that right first time. But successful companies learn, adapt, and crack the challenge with follow-up products.
Publishing giants such as Tencent, MiHoYo, and Krafton are now more experienced and able to deploy globally competitive AAA budgets.
An exciting new batch of titles are on their way and ranking in Westerners’ wishlists.
From China, we have our eye on Arena Breakout: Infinite, Mecha Break, Marvel Rivals, and Phantom Blade Zero, among others.
While from Korea, we’re keeping tabs on Inzoi, The First Berserker: Khazan, Crimson Desert and more.
The gaming world is tilting on its axis, and it’s only a matter of time before Chinese and Korean game producers are household names everywhere.
Dialect is an integrated videogame marketing agency based in the US and UK. We have unparalleled experience in assisting publishers bring their games to market in North America and Europe.
If you would like to discover more about our integrated approach and work together on a project, get in touch.
