Sony’s (SNE) PlayStation 5 and Microsoft’s (MSFT) Xbox Series X are two of the most powerful game consoles ever built. They’re also nearly impossible to get your hands on.
If you’re a gamer, or have been trying to buy a console for a gamer in your life, you know that whenever they go on sale, the PS5 and Series X sell out in seconds. Whether it’s scalpers using automated bots to grab any available consoles online or retailers having minimal inventory, the consoles are seemingly as elusive as Big Foot.
The problem? The same issue squeezing every other industry on Earth that relies on semiconductors: a global chip shortage caused by a massive increase in demand for chips as consumers seek out everything from computers to TVs for work and entertainment during the pandemic.
But there’s good news for gamers out there, and a bit of bad news. The good news is, chip and console makers are working to get more systems out to the public as fast as possible. The bad news? They’ll probably still be just as hard to find until at least the second half of the year.
Brisk sales, and high demand
Sales of the latest generation of consoles have been strong for Sony and Microsoft since they launched their systems in November. Sony sold 4.5 million PS5s in Q3 2020, the console’s first quarter of availability. For its part, Microsoft, which doesn’t break out unit sales of Xbox hardware, saw its games revenue surge 40% in its fiscal Q2 2021.
“It's always challenging to ramp up supply enough to meet that initial demand that you have for a next generation of consoles,” Jon Erensen, senior director with the Gartner Technology and Service Provider research group, told Yahoo Finance.
“This time with Sony and Microsoft launching at the same time…it’s been even more challenging because of some of these issues that we've seen around the pandemic and around the chip supply,” he added.
Both Microsoft and Sony say they’re pushing out as many consoles as possible, with Sony Interactive Entertainment CEO Jim Ryan saying in November that the company’s entire stock was sold out.
“Everything is sold. Absolutely everything is sold,” Ryan told the Russian publication Tass. “I’ve spent much of the last year trying to be sure that we can generate enough demand for the product. And now... I’m spending a lot more time on trying to increase supply to meet that demand.”
A Microsoft spokesperson, meanwhile, told Yahoo Finance that the tech giant is working with its retail partners to replenish stock of its systems as soon as possible.
So when can you expect console supplies to begin to open up for more customers? According to AMD CEO Lisa Su, there should be more production capabilities for its chips in the second half of the year. For gamers, that means they might have to wait as long as until Q3 2021 to get their hands on the latest consoles.
Chip manufacturers can’t keep up
Every major industry you can think of relies on semiconductors. Our world runs on chips — whether that’s the medical industry, the PC industry, or the automotive industry.
But the coronavirus pandemic threw a curveball at the global economy. As people around the world stayed home to blunt the spread of the virus, they began buying up consumer electronics. According to IDC, PC sales grew by 13.1% in 2020, the most in a decade.
“It's fair to say that the overall demand exceeded our planning,” Su said during AMD's Q4 2020 earnings call. “And as a result, we did have some supply constraints as we ended the year. Those were primarily, I would say, in the PC market, the low end of the PC market and in the gaming markets.” Both Microsoft and Sony use custom AMD chips in their latest consoles.
“The industry does need to increase the overall capacity levels,” Su added. “And so we do see some tightness through the first-half of the year, but there's added capacity in the second half.”
According to Erensen, the dramatic increase in demand for consumer electronics has pummeled chip manufacturers, which have limited capacity at their factories to meet their customers’ needs.
“They're all fighting for the allocations that they need,” Erensen said. “But there's not enough to go around. So, you are seeing a shortage, really not just in game consoles, but you're seeing shortages impact all sorts of different markets.”
It’s an unfortunate disappointment. But hopefully supplies will open up faster, so more gamers can play the hottest games to help pass the time during the waning days of the pandemic.
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Got a tip? Email Daniel Howley at dhowley@yahoofinance.com over via encrypted mail at danielphowley@protonmail.com, and follow him on Twitter at @DanielHowley.
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