Square Enix's Bold Restructuring: Exploring the Future of Game Development from the UK and US to Japan

"Slimming Down Overseas, Consolidating in Japan"—Square Enix's Painful Reorganization, Its Inevitability and Blind Spots

On the morning of November 7, 2025, Engadget reported that "Square Enix is proceeding with further developer layoffs in the US and UK, steering towards a focus on Japan." In essence, the policy of "reducing overseas operations and reinvesting in Japan" has manifested once again as a concrete reduction in personnel.Engadget

On the same day (local time on the 6th), VGC's follow-up report stated that during a company-wide meeting in Europe and the US, President Takamasa Kiryu announced a "fundamental reorganization of overseas publishing," indicating that layoffs would occur in "almost all areas" in the West. In London, about 140 people were reportedly notified as "at risk." The affected business areas are wide-ranging, including IT, marketing, publishing, sales, QA, and business planning. The goal is to cut costs by over 3 billion yen annually.VGC

A few hours earlier, the company revealed a development process reform aiming to "automate 70% of QA and debugging with generative AI by the end of 2027." This project, conducted in collaboration with a research lab at the University of Tokyo, aims to improve QA efficiency and establish a competitive advantage. Almost simultaneously with the layoff announcement, a future vision of "reducing human resources and filling the gap with AI" was presented.VGC

Why Focus on Japan Now?

The background includes stagnant performance over the past few years and a major policy shift. In 2022, the company sold major Western studios like Crystal Dynamics and Eidos Montreal, streamlining its portfolio. The decision to "slim down overseas and focus on Japanese development" is an extension of this strategy.The Guardian

The strengths of Western bases lie in their global marketing sense and expertise in large-scale development. However, when high costs, intensified competition, and underperforming titles converge, fixed costs become a burden. According to VGC, the limited effects of last year's overseas reorganization also supported this decision.VGC

Is "70% QA by AI" a Shortcut or a Detour?

The concept of replacing a large portion of QA with AI is easy to understand for investors. In theory, automation can contribute to shorter construction periods and improved bug detection coverage. However, generative AI struggles with areas where the "definition of anomalies" is vague and with understanding the tactile and contextual nuances unique to games. In the community, there are concerns that "removing human intuition could worsen initial quality and impressions in streams and broadcasts, ultimately affecting sales."GamesRadar+　Reddit

The key here is to simultaneously achieve "reducing personnel" and "enhancing experience quality." For instance, running comprehensive regression checks with AI while refining subjective evaluation areas like difficulty curves, story branching, and photo mode aesthetics by human hands. AI should be designed to "amplify" QA rather than "replace" it, as short-term cost reductions could lead to skyrocketing reputational costs in the medium to long term.

The Atmosphere on Social Media—Empathy, Resignation, and Anxiety

Posts about the layoffs quickly spread on X and Reddit. In multiple Reddit threads, questions about the geographical bias of "only the West being cut again," criticisms of "preparing for AI replacement," and a sense of resignation that "the entire industry is rushing towards cost optimization" coexist. To summarize some quotes—

• "Layoffs have been ongoing for the past two years. Something's going to give eventually (PS5 board)"Reddit

• "70% QA by AI? There's no way that will work, just a gut feeling" (PS5 board reaction)Reddit

• "The high cost of the West is hitting hard" (PS5 board)Reddit

• "Under the guise of 'lean' and 'agile,' are they just forcing 'small elite teams'?" (Xbox community)Reddit

Engadget's own post on X also garnered attention, making the article's points—developer reductions in the US and UK and the return to Japan—widely visible.X (formerly Twitter)

Impact on User Experience

In the short term, there are concerns that localization and the "impact of details" in promotions for Western markets may dull. In the medium term, there may be variations in quality during the transition to AI-led QA. In the long term, whether a Japan-led production system can stably supply major titles like "FF" and "DQ" across multiple formats will be the litmus test. If the operation succeeds, development efficiency will improve, lending credibility to the company's proclaimed "reboot and awakening." However, if the creative base and talent pipeline (especially the career path from QA to planning and design) shrink, there could be a shortage of "people who can create" in a few years.VGC

What Could Be the "Next Move"?

1. AI Transparency: Define which processes AI will handle and where humans will make the final judgment, drawing a line that can be explained externally.

2. Utilizing Overseas "Small Elite Teams": Instead of a complete withdrawal, maintain small teams to refine "impactful elements" in optimal locations for each IP.

3. Dialogue with the Community: Trust wavers immediately after layoffs. Expand development reports and beta testing to demonstrate quality and responsiveness.

4. Designing Post-Launch Operations: Assuming AI and human collaboration, publish a roadmap for initial patches and live operations early.

Ultimately, the layoffs are explained as "pain for regrowth." However, to ensure that this pain does not become mere erosion, how to design a complementary relationship between AI and humans is crucial—Square Enix's next decade hinges on this.