A survey by the Game Developers of Australia Association found almost a third of Brisbane studios were highly concerned about the threat of competition from offshore companies.
News.com.au reports that the boom in skill levels appearing in the Chinese and Indian markets could lead to many publishers relocating their development businesses to the Asian region.
"Once China cracks the creativity side of things, then the local Australian industry is in trouble,'' Auran Studios’ Tony Hilliam said.
"The region has realised that building it cheaper doesn't work in games. It's not like building a fridge. The way to generate revenues is to have fun games, and once they're cheaper and smarter, then we're in trouble.''
The Australian games industry is currently worth in the region of AUS$110 million, and this is expected to rise to AUS$500 million by 2010. But as the dollar has grown stronger and the skills gap in Asia has narrowed, Australia has become less attractive for foreign investors.