Yang Liu’s parents planted roots in suburban Michigan hoping their son, who was born in China, would find success in the world’s biggest economy. In early 2020, they got their wish: End Game Interactive, the mobile game startup he co-founded in their home, raised $3 million on the back of breakout hit Zombs Royale.

Then, the U.S. still commanded a major slice of what’s now a $121 billion global industry thanks to games like Temple Run, Plants vs Zombies and Pokemon Go. But now, Liu is one of a generation of American game designers despairing as Chinese studios churn out games that are faster, cheaper and able to extract more spending from players. Operating costs in the U.S. are now so high that Liu is building out his business in Latin America, where he employs more than 40 people.

“It’s extraordinarily hard for startups like ours – despite having an incredible amount of capital – to find individuals to compete on the global stage, which gaming has become in the past 10 years; and one in which the U.S. is no longer the dominant force,” Liu said.

China’s advance has been rapid. As recently as early 2024, the U.S. and China were virtually neck-and-neck in terms of revenue share from the world’s top 100 mobile games, according to data from Sensor Tower. But by mid-2026, China held 40% of the global market, compared with just 16.5% for the U.S., as the Asian nation dominated the charts with hits like Honor of Kings and Whiteout Survival.

In a cruel twist, China’s biggest overseas market last year was the U.S. itself. Chinese titles account for over 18% of revenue from the top-100 games there, up from 8% at the start of the decade. At the same time, the share held by U.S. publishers has shrunk from 40% to less than 30%.

China’s gains on the U.S. in sectors ranging from AI to electric vehicles, solar panels and drug development, are well-documented. While the mobile gaming sector gets less attention, it’s the fastest-growing part of the global games industry, and eclipses both Hollywood and music streaming in terms of revenue.

Mobile games’ ubiquity — more than 3 billion people will play them this year — means they’re an understated but potent channel of soft power. The highly stylized fantasy and anime characters that dominate top Chinese titles now anchor the daily digital feeds of Gen Z and Gen Alpha, underscoring the broader departure from American cultural hegemony.

It’s left developers in the U.S. grappling with existential questions around how to compete with China’s extensive supply chain and unmatched development speeds. In a nod to the structural shift at play, some top American developers like Microsoft Corp.’s Activision Blizzard and Take-Two Interactive Software Inc.’s Zynga are using Chinese studios to make their games.

Call to arms

It’s not just China taking share from the U.S.. Studios in Singapore have produced Garena Free Fire. Turkish startup Dream Games has the popular Royal Match puzzle game and a swell of M&A activity has underpinned rapid growth in recent years. In the second quarter, publishers from those two countries combined accounted for 18% of revenue from the top 100 games in the U.S., up from 1.2% in the first quarter of 2020, according to Sensor Tower.

Meanwhile, Finland is a global gaming hub that’s produced Angry Birds, as well as some of the world’s current top titles like Supercell’s Clash of Clans and Clash Royale. Still, there’s no escaping China’s reach; Supercell has been majority owned by Tencent Holdings Ltd. since 2016.

In February, Supercell CEO Ilkka Paananen issued a call for innovation to close the gap with Asian companies. Of the 22 games launched since 2020 that had grossed at least $1 billion, 20 were from developers in China, Japan, and South Korea. Just two were developed in the West: Royal Match and Monopoly Go, he said.

“We in the West should look in the mirror,” he said in a blog post. “The fact is, we have not brought radical new gameplay innovation to the market.”

For many years, Chinese studios released what were essentially copies of popular foreign games, known as reskins, or free-to-play versions that had shorter sessions and lower graphics quality. But much like in EVs and other consumer products, China’s ability to build out the supply chain and harness a huge pool of cheap labor has underpinned its rise to global prominence.

Making money

China’s huge domestic audience of about 680 million gamers also means developers have finessed how to make money by the time they release a game internationally.

By mid-2026, Chinese titles generated about $47 in quarterly revenue per active user in the U.S. market. That’s nearly six times the $8 average for American games — a threshold that’s stayed relatively stagnant over the past decade.

For many in the industry, Genshin Impact, released in September 2020 by China’s MiHoYo, is a rubicon. The free-to-play role-playing game came three years after Nintendo Co. released Zelda: Breath of the Wild and built on what had drawn fans to the blockbuster hit – windswept fantasy worlds, plucky but powerful protagonists – to become a quick-moving sensation on smartphones, PCs and PlayStations.

Crucially, the game managed to monetize its audience of millions, though its methods saw it pay $20 million to settle a claim in the U.S. that it used a convoluted and chance-based system to obscure the true cost of prizes in so-called loot boxes.

Still, it’s earned $6.2 billion from mobile gamers alone, showing that a high-budget, anime-style open-world game could be a hit in the West. Most recently, MiHoYo games were featured in ads for Apple Inc.’s new iPad mini and iPhone Duo.

MiHoYo’s developers are “like economists and psychologists making video games,” says Robert Wynne, co-founder of Rising Tide Studios, which develops games in China. “They’ve mastered player behavior where they know exactly what you want and when.”

But the leading Chinese force is Tencent, now the biggest gaming company in the world. In just the first half of 2026, its Honor of Kings is estimated to have earned $1 billion and, more than a decade after its release, is helping drive a double-digit increase in Tencent’s domestic game revenue. Niko Partners estimates that Honor of Kings has grossed over $30 billion since it was released.

“Which U.S. game company can go against Tencent today, head-to-head? None,” said Liu. “Against NetEase? None. Even against MiHoYo? None.”

More recently, China’s push for growth has shown there’s money to be made from women gamers — a segment in which Western companies have been slow to gain traction. Love and Deepspace, in which a female protagonist is wooed by anime men with artfully tousled hair and smoldering eyes, has raked in more than $60 million in some months since its launch in 2024 by teasing new romantic scenarios that are locked behind paywalls.

Fading dream

Meanwhile, the American industry is a shadow of its former self.

Last year, Electronic Arts shut down seven mobile games made by Glu Mobile, the mobile-gaming company it bought for $2.1 billion in 2021.

Microsoft has only released a trickle of new mobile games after its $69 billion purchase of Activision Blizzard in 2023, which gave the software company the long-running hit Candy Crush. At the time, Microsoft said that the acquisition was aimed at accelerating the growth of its mobile gaming business.

Representatives from EA, Zynga, Tencent and Microsoft declined to comment. NetEase and MiHoYo didn’t provide comment when contacted by Bloomberg News.

In a sign of the times, hits like Call of Duty Mobile and Diablo Immortal were made in China, partially for Chinese gamers, though Microsoft owns those titles. A Blizzard spokesperson told Kotaku for a 2018 story on this that Diablo Immortal had been developed for both Western and Eastern markets and that one of the company’s core values is to think globally.

Worldwide, Chinese publishers now produce 40 of the top 100 titles, up from 21 a decade ago, while U.S. publishers have fallen to 13 from 22, according to Sensor Tower.

With Saudi Arabia’s Public Investment Fund scooping up Scopely and Niantic, that leaves just a handful of American-owned and -based developers remaining.

American firms looking at overseas markets face hurdles in China. A tricky regulatory environment effectively boxes them out of the market that’s expected to generate $41 billion by 2030, according to Niko Partners. In the first half of the year, the National Press and Publication Administration approved 1,110 domestic video games for Chinese consumers and just 37 from international game developers.

That lopsided access has been a longtime bugbear of Western countries, which after years of relative openness are tightening access to Chinese technology. The U.S. has investigated Tencent over its stakes in Riot Games and Epic Games and the company has been designated as a Chinese military company — a classification it denies.

But talent is where China really has the edge.

Salaries are the biggest expense for game companies and game makers. They pay, on average, $142,000 for every developer in the U.S., according to a survey by the Game Developers Conference. In Shanghai, where salaries tend to be higher, the average game developer earns about $50,000 a year, according to data from Glassdoor.

“Salaries have been rising in the West and there’s a bit of complacency on top of that,” says Jens Hilgers, the founding general partner of Bitkraft Ventures, an investment platform for gaming. “In the East, you have people who are getting more hungry, who are understanding, ‘How do I develop for global markets and Western markets?’”

U.S. mobile game makers are trying to adapt.

Some are opting out of the free-to-play model and asking gamers to pay for games despite widespread reluctance around upfront purchases. Globally, just 16 games appear in the top 100 lists for both downloads and revenues.

Others are shifting from mobile platforms to the open web, where Apple and Alphabet Inc.’s Google can’t extract fees from every purchase — a headwind for U.S. developers in particular. In China, game developers are tapping into the popularity of apps like WeChat and Douyin as platforms to develop so-called mini games.

Still, Liu says it’s a pessimistic outlook despite America’s status as a top country for business and entrepreneurship.

“Seeing a country that blessed me with so many opportunities undergo such a decline in the industry I am in, and that I love — is deeply sad.”

(With assistance from Zheping Huang and Lulu Shen.)

©2026 Bloomberg L.P. Visit bloomberg.com. Distributed by Tribune Content Agency, LLC.