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Will the Global Chip Shortage Accelerate the Death of Video Game Consoles like PS5 and Xbox?

·4 min read

It’s been a weird 18 months, to say the least, and right when it seemed like life was getting back to business as usual, a global chip shortage is threatening to drive up prices of the electronics that are crucial to our lives such as laptops, printers and even automobiles. In the gaming world, some products are downright unattainable.

Despite the fact that the Xbox Series X and PlayStation 5 were both released almost nine months ago, they’re both in extremely short supply. In theory, you can find PS5s for sale online, but in practice, the price gougers will get there first. Likewise, in the PC space, trying to get your hands on a gaming-class CPU or GPU is easier said than done. And that even includes the last generation of chips!

ps5-launch-updates
ps5-launch-updates

Meanwhile, we haven’t even seen what’s going to happen when the Nintendo Switch (OLED Model) releases in October 2021.

On the surface, this has all the makings of a crisis for the gaming world. The popularity of the Nintendo Switch has already shown that gamers aren’t nearly as concerned about raw technical performance as long as the games are still fun to play. And on top of this, there’s a new way of playing games that has been making waves over the past few years: cloud-based game streaming. As they continue to improve, the best cloud gaming services could make the console wars irrelevant in the years ahead.

Pushed forward by the likes of Microsoft (Xbox Game Pass), Google (Stadia), Amazon (Luna) and NVIDIA (GeForce Now), these services let you connect to the cloud on any device that has a fast internet connection and controller support, and you can play games in up to 4K resolution. All without the need for a $3000 gaming PC.

Read More: The Best Games to Play on Xbox Game Pass

Xbox Game Pass
Xbox Game Pass

The technology has shown some promise in the early days, and consistent growth has seen Microsoft invest more and more resources into the technology.

And so with consoles becoming so hard to find and cloud gaming on the rise, it’s only natural to wonder if there’s about to be a sea change in the gaming industry.

But is the chip shortage really accelerating the death of the gaming console?

Why Gaming Consoles Are Set to Weather The Chip Shortage Storm

In the eyes of IDG analyst Lewis Ward, the gaming console is not likely to disappear anytime soon.

“I think there’s an important distinction to make before people who have tried it and who are paying for it. I think that the skew towards the free users and people trialing [cloud gaming] is a little bit higher than some other folks may think,” Ward said in a phone interview. “In some senses cloud stream gaming is really just a distribution channel and not a particularly exciting one. One that might never beat the download model at its own game, which is table stakes for it to grow.”

While Ward has seen metrics indicating a lot of gamers are trying cloud streaming, he doesn’t believe that these services are retaining paying customers with as much success.

Google Stadia controller
Google Stadia controller

Furthermore, even if there were an overnight mass migration of traditional hardcore gamers willing to go entirely into the cloud, Ward feels that the chip shortage would affect the cloud space all the same. The cloud runs on processors too, after all.

So why is Ward so skeptical? He explains that if you were to put hardcore gamers and those who are uninterested in paying thousands of dollars on gaming hardware up against each other the overlap between the two would be minimal.

“The Venn diagram of people who want to play AAA games and you overlay that with gamers who are unwilling to pay $300-$500 for hardware is a very small overlap. [They’re] trying to solve a problem that basically doesn’t exist.”

So What Does This All Amount To?

In all likelihood, we’re going to willingly wait for the next generation of consoles to get to a point where they are regularly in stock again. And how long will that take?

Nobody can be 100% sure, but Ward estimates that the chip shortage could extend into the early parts of 2022, while some more extreme estimates suggest that things might not calm down until 2023.

A few years ago, it was hard to imagine a gaming world without consoles. But unless Microsoft and Sony can figure out how to get consoles into the hands of customers, they might find that gamers have already moved on to something else.

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