Eager gamers can’t be consoled as chip shortage set to ruin Christmas

Australian consumers hoping to get their hands on the latest game consoles from Microsoft and Sony may have to get used to disappointment, as the persistent shortage of semiconductors globally looks set to make the devices scarce come Christmas time.

The PlayStation 5 and Xbox Series X have both already outsold their respective predecessors over the first half year of availability, and demand has well outsripped supply, with Perpetual fund manager Thomas Rice saying the squeeze still has some way to go.

“The key question is: why can’t supply meet this increased demand they’re seeing? And the reason is there’s a global semiconductor shortage,” he said. “The shortage will gradually decline but I think it will still be here for the next 18–24 months.”

The world is in the midst of a global semiconductor shortage. Credit: Bloomberg

The series of events leading to the serious undersupply of computer chips started with deteriorating US-China trade discussions in 2019, and companies in both countries — including Apple and Huawei — began hoarding chips to secure their own supply, Mr Rice said.

But then the pandemic unexpectedly and broadly increased demand for electronic components as internet and computer infrastructure became more central to everybody’s lives, and spending shifted towards home entertainment.

Taiwan Semiconductor Manufacturing Company, which makes the majority of the world’s computer chips, has committed to spending more than $130 billion to increase output, but new fabrication sites could take years to establish. It will also reportedly give priority on chips currently under production to car manufacturers and Apple.

Sony sold 7.8 million PlayStation 5 consoles globally in its last financial year, which ended in March. It forecasts selling 14.8 million this financial year but Mr Rice estimates demand is more like 20 million.

Data from the Interactive Games & Entertainment Association in 2019 showed that two thirds of Australians played video games, and that 65 per cent of those played on consoles. But numbers may have lifted further since then.

“People staying at home has just increased demand,” Mr Rice said.

“If you look at the stats on [PC gaming platform] Steam for concurrent users, for 2017 to 2019 it’s essentially flat. In 2020, concurrent users were up 40 per cent.”

We would love to be getting more consoles into people’s hands.

Matt Booty, head of Xbox Games Studios

Microsoft hasn’t given sales numbers or estimates for its Xbox Series X, or the less expensive Xbox Series S, beyond saying more than one million were sold on launch day. But, using retail sampling, website VGChartz estimates the Xbox consoles combined have sold 5.33 million units to date.

Matt Booty, head of Xbox Game Studios, said that the pandemic and the chips shortage combined had heavily affected production of both games and consoles.

“Right now we’re coming up on the second holiday for our brand new console, and we know that across the world, across the industry, there are shortages of electronics. And we would love to be getting more consoles into people’s hands,” he said.

“Our teams have been great with creative uses of new technologies, and trying to do a lot of innovative new things to support hybrid work and working from home, but at the end of the day we are a collaborative, creative business and it just gets harder with bigger teams”.

Horizon Forbidden West is one of the major games arriving for this holiday season but few will be able to play it on PlayStation 5.

Many blockbuster games have been delayed as a result of large teams having to work from home. Or worse, as in the case of last year’s Cyberpunk 2077, released to consumers in an unstable state.

Even the biggest biggest games for this holiday season, Horizon Forbidden West (Sony) and Halo Infinite (Microsoft), are yet to be given firm release dates.

“I think we’re going to continue to see projects being delayed by some amount, across the industry,” Mr Booty said.

“Everybody is trying to do their best in the situation to get things done ... it’s just difficult to keep a team with several hundred people on it focused and organised and rallied when you can’t get them all together in person.”

In the meantime, Sony has walked back earlier statements that many new games would be exclusive to PlayStation 5, meaning new games including Horizon and the next God of War will be playable on PlayStation 4 as well. And both PlayStation and Xbox have mechanisms to upgrade games to PS5 and Series X quality, so you can buy games for older systems now and not need to rebuy them later.

Microsoft includes all of its own games in the Game Pass subscription service, which works across various Xbox consoles as well as PC. And the cloud streaming component of Game Pass will soon allow Series X games to be played on older consoles, smartphones, browsers and potentially smart TVs, which Booty said is part of a strategy to meet players at the devices they’re on.

“I think that a console putting out a 4K image at 120 frames per second to a TV, with no compression, is always going to be the best way to experience a game,” he said.

“We really think of [streaming] as more additive, that these things each add to the overall situation, and not that we’re trying to replace one thing with another . It’s like just like the fact that I can watch Netflix on my phone if I’m stuck in an airport. Whatever suits your needs and lifestyle.”

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