SINGAPORE – Demand for video games has surged to unprecedented levels in the era of lockdowns and Covid-19, but finding a new PlayStation 5, Xbox Series X|S and Nintendo Switch is easier said than done. Console manufacturers see no end in sight to global shortages of the cheap but essential chips needed to boost the availability of their coveted gaming machines.
With general-purpose chips for audio, power management and wireless communication functions in short supply in recent months, Japanese electronics makers Sony and Nintendo have made significant downward revisions to their sales targets for the financial year and spoken in stark terms about the turmoil in their operations caused by chip shortages.
“Judging by recent statements and projections made by the top management at Microsoft, Sony and Nintendo, things will continue to look bad at least into the second half of 2022,” said Serkan Toto, founder of Tokyo-based game industry consultancy Kantan Games, who added that semiconductor shortages may only begin to ease in 2023.
Industry analysts say console manufacturers may substitute certain components for readily available alternatives in the months ahead to cope with the supply crunch, and that the release of next-generation hardware, including a rumored more powerful revision of the top-selling Nintendo Switch console, could be held up until supply chain disruptions are resolved.
Now in its fifth year on the market, the Switch was the best-selling console of 2021 both in unit and dollar sales despite being cheaper and vastly underpowered than the competition. While not immune to stock shortages, it has been comparatively easier for consumers to find in stories than rarer next-generation machines from rivals Sony and Microsoft.
Sony’s flagship PS5 console has been in scarce supply since its debut in November 2020, being hit by a series of unanticipated challenges including a slower-than-expected production pace caused by chip shortages and internet scalpers using bots to snatch up units during online restocks, choking off retail supplies of the powerful home entertainment system.
“If you want a real gauge of the demand for chips, just look at PlayStation 5. The date you can get hold of a PS5 at its normal retail price, you would know demand is more or less tapering off. There’s still no sign of that happening in the near future,” said Ang Wee Seng, executive director of the Singapore Semiconductor Industry Association (SSIA).
PS5 consoles may not be easier to come by in 2022. In November, the Japanese electronics maker scaled back its production outlook for the fiscal year ending in March. Sony had aimed to produce more than 16 million units but reportedly cut that target down to 15 million due to component shortages and logistical constraints.
In January, Bloomberg reported that Sony will continue producing older PlayStation 4 (PS4) consoles throughout 2022 due to disruptions hampering production of the pricier, more-advanced PS5. The Tokyo-based conglomerate had originally planned to discontinue assembly of the PS4 at the end of 2021 but is now expected to produce a million additional units in 2022.
With first-party Sony titles like God of War and the upcoming Horizon Forbidden West playable on both the PS4 and PS5, production of the eight-year-old earlier-generation console, which uses less advanced chips and is cheaper to make, aims to help offset demand for PlayStation hardware with a budget-friendly alternative to the elusive PS5.
The PS5 is powered by a custom system on a chip (SoC) designed by Sony and American semiconductor firm AMD and based on the latter’s 7-nanometer Zen 2 architecture, while the upgraded PS4 Pro, released in 2016, uses an accelerated processing unit (APU) built with Taiwanese chip foundry leader TSMC’s 16-nanometer process.
In what analysts see as likely the result of supply chain issues, Microsoft’s cheaper, all-digital Xbox Series S is out-selling the powerful Series X in several key markets. “Microsoft increased production of Xbox Series S consoles over the past year as it struggled to keep Series X in stock,” said Daniel Ahmad, a senior analyst at Niko Partners.
“Prior to the pandemic, we anticipated that Series X would be the best seller in the short term, with Series S selling better down the line. The Series S is now performing better than expected at an earlier stage,” Ahmad told Asia Times, estimating 12 million units in combined sales of the Series X and S since their launch in November 2020.
Analysts say the PS5 is expected to outsell Xbox Series X|S consoles in 2022. The PS5 was the fastest Sony console to reach 10 million units sold in July last year, though its overall first-year sales pace amid the chip crunch has comparatively lagged the PS4. Sales tracking website VGChartz estimates that total sales of the PS5 were at over 18 million units as of January 15.
The Nintendo Switch, meanwhile, is widely projected to remain this year’s top-selling console, though its margin over PS5 is likely to fall. VGChartz estimates that lifetime sales of the Switch have exceeded the Wii, Nintendo’s best-selling home console, at over 102 million units, a figure the Kyoto-based game maker has yet to officially confirm.
Severe production bottlenecks for essential chips and other electronic parts forced Nintendo to cut its full-year Switch sales forecast through March by 1.5 million units in November, revising its sales target to 24 million units, below the 28.8 million units moved in 2020 as consumers clamored for the console amid Covid-19 lockdowns.
Nintendo president Shuntaro Furukawa has warned Switch shortages will persist in 2022, telling Japanese newspaper Kyoto Shimbun in an interview last month that “the global shortage of semiconductors and the turmoil in logistics” will continue to affect supplies of the hybrid gaming device for the foreseeable future.
Analysts say the enduring popularity of the Switch lies in its core innovation of being playable both on a television display and portably on a handheld device, as well as a stable of iconic franchises such as Super Mario, The Legend of Zelda and Pokémon, whose critically-acclaimed mainline titles are available exclusively on Nintendo hardware.
But despite its momentum, the Switch hardware is starting to show its age, analysts say. While Nintendo has a long history of opting for more mature and lower-cost technology to power its consoles, the gap in performance capabilities compared to the PS5 and Xbox Series X|S is increasingly stark and has spurred calls for upgraded hardware.
Bloomberg published several reports last year pointing to the imminent reveal of a more powerful Switch model with an upgraded central processor unit (CPU) and high-fidelity 4K display capabilities when connected to a television, which Sony and Microsoft have offered on their rival consoles for several years.
According to reports, the rumored high-spec “Switch Pro” would support Deep Learning Super Sampling, or DLSS, a novel image upscaling feature that uses artificial intelligence to reproduce game visuals at 4K, a technology pioneered by US semiconductor firm Nvidia Corporation which is exclusive to the graphics cards it produces.
But when Nintendo announced its first major Switch hardware revision in July, the new model featured a larger 7-inch OLED display as its primary upgrade without any of the performance-enhancing additions reported by Bloomberg, disappointing investors and fans that had hoped to see a device with better graphics and processing power.
“There is a high possibility a Switch Pro has fallen victim to the component shortage,” said Toto of Katan Games consultancy. It’s a view shared by other analysts who see the release of a more powerful Switch model or a next-generation console successor as contingent on the resolution of supply disruptions, meaning it may not hit shelves until 2024.
“The processor shortage plays a part in next-generation releases,” said senior game tech analyst Ted Pollak of consulting firm Jon Peddie Research, while pointing out that Nintendo has been known to issue hardware revisions that represent only “half-steps” between generations of its past handheld and home consoles.
“A next-generation processor-based Switch Pro and all other products with system-on-a-chip, or SoCs, made by Nvidia, Qualcomm, Samsung and MediaTek are dependent on the unclogging of supply chains from the semiconductor fabs of TSMC and Samsung, who build the next-generation 7-nanometer parts,” he told Asia Times, referring to Taiwanese and South Korean chip makers.
In November, Nintendo executive Ko Shiota said the company was looking at “substituting components and tweaking designs” to reduce the impact of the global chip shortage. Analysts are of two minds as to whether console makers will actually push through new design tweaks given that some see chip and other component supply issues stabilizing in the near term.
“Consoles makers will not rush into new component designs or refurbished chips, considering that the chip shortage is anticipated to be under control in the short term,” said analytics firm GlobalData’s gaming analyst Rupantar Guha. “Instead, they will aim to deliver the consoles with the original specifications.”
GlobalData expects the chip shortage to ease off in the latter half of 2022 as US and European manufacturers increase capacity and production. “Higher competition, with several gaming companies now trying their hand at vertically integrating some of the chipmaking abilities, is leading to faster growth,” the firm’s thematic research analyst Daniel Clarke said.
Barring any “black swan” events, analyst Pollak said supply chain issues could be fully resolved by the fourth quarter of this year, adding that while console makers could substitute power supplies, hard drives, resistors and capacitors, components for random-access memory would be more difficult. Processors, he said, would be “almost impossible to substitute.”
With demand outpacing supply since the onset of the pandemic, Ahmad of Niko Partners is less sanguine that part shortages and supply chain disruptions will clear up any time soon. “Based on our research and comments from manufacturers, we anticipate the shortage to continue through till 2023,” he told Asia Times.
Ahmad added that while he anticipates Nintendo will launch a more powerful Switch console in the future “as it is clear there is demand from existing owners for higher-end games,” soaring pandemic-era sales of the hybrid console “meant that a 4K device was not needed in 2021 and that the OLED model is primarily designed to sustain overall demand.”
Katan Games’ founder Toto doesn’t rule out the release of a “Pro” version of the Switch this year, but with the component shortage still looming, he believes Nintendo may pass on a hardware revision altogether and release a next-generation console successor that is fully backward-compatible with the original Switch’s software library in 2024.
“The OLED model is an improvement but the Switch is rapidly aging and definitely needs Nintendo to beef it up,” said Toto, pointing to a rising number of third-party titles from other systems that have struggled to run on the hybrid device. “A ‘Pro’ version could make life a lot easier for developers wanting to bring their top games to Nintendo.”