The game industry can’t escape the chip shortage

The chip shortage comes for the game industry

Those hoping to fire up a new game console this holiday season got a flurry of bad news last week, due to the ongoing logistics nightmare that is the global chip shortage. Though it's been an ongoing crisis for many in the auto and electronics industries, game hardware makers have been rather resilient thanks to robust supply chains. But with the chip shortage expected to persist well into next year, it was only a matter of time before deadlines began to slip.

The winds seemed to change last week. Valve announced its Steam Deck console wouldn't make its initial December release date. Instead, the first run of units will ship in February. Video game publisher and software maker Panic also pushed the launch of its unique Playdate handheld to 2022.

• Valve cited the chip shortage as the main culprit. "We did our best to work around the global supply chain issues, but due to material shortages, components aren't reaching our manufacturing facilities in time for us to meet our initial launch dates," Valve said in a statement .
• Panic's situation was a little more complex, involving a battery issue that forced the company to ship back thousands of units to Malaysia for replacements. And in an email to customers , co-founder Cabel Sasser said the global chip shortage meant their CPU of choice was backordered for more than two years, though they were fortunate enough to find a new chip.
• "Maybe you've heard about the 'global chip shortage' everyone's talking about? We're here to say it is very real," Sasser wrote. "There are a number of other part shortages we're trying to outsmart right now, and while it's stressful and frustrating, rest assured we will do everything we can to make as many Playdates as we can for you."

It's not just new hardware, either. Both Sony and Nintendo this month released revised sales estimates for their home consoles, lowering outlooks for the current fiscal year by millions of units.

• It's been difficult to buy Sony's PlayStation 5, more so than any other piece of gaming hardware. That's hampered the console's sales performance. While the PS5 hit the 10 million unit milestone faster than any console before it, achieving the goal in July, sales have since slowed.
• As the situation stands, Sony's PS4 is the better-performing console at this stage in the life cycle, despite overwhelming demand for the PS5. Sony now expects to sell around 14.8 million consoles by the end of the fiscal year in March, but its production partners think its goal of 22.6 million consoles in the fiscal year starting next April might be unrealistic.
• Nintendo lowered its forecast by 1.5 million units and now expects to sell around 24 million consoles this fiscal year. The chip shortage also reportedly affected the company's plans to release a more powerful Switch with a faster chipset, though Nintendo has denied those reports as it markets its new Switch OLED model as a modest replacement.

The chip shortage isn't going away. It's not so much any one chip, like the AMD processor that powers the PS5 or the Nvidia one inside the Switch, but rather run-of-the-mill chips still made by only a small number of suppliers.

• "They're not the things we think of as maybe the more well-known components like processors or memory. Those are actually pretty healthy," explained analyst Ryan Reith. "These are a lot of smaller what we call ICs, or integrated circuits, that are critical."
• Hard-to-find chips combined with crushing demand and a supply chain bottleneck has meant fewer electronics devices and far too many eager customers across multiple categories, including gaming and education.
• "Our current prediction is for there to be a better balance somewhere in the second or third quarter of next year," said semiconductor analyst Gaurav Gupta with the firm Gartner. "It's uncharted territory. There are ups and downs within the semiconductor industry, but this is not restricted to semiconductors. It's more of a global issue."

It was always perhaps unrealistic to assume new devices sporting all customer chipsets and other unique parts would ship on time, especially for companies like Valve without as many supply chain connections as, say, Apple.

But it's a worrying sign the chip shortage is still proving a critical hurdle for companies as experienced as Sony, translating to even longer wait times until the PS5 is easy to buy. If anything, it means this console generation might not take the shape of those in the past, and it could last far longer if it takes years for supply to catch up with demand.

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Overheard

• "We've invested for years in Xbox so more people can play. With 4.5+ million players so far across PC, cloud & console, Forza Horizon 5 shows that promise coming to life. Largest launch day for [an] XGS game." ―Xbox chief Phil Spencer revealed last week that Playground Games' new racing title is a record-breaker for Microsoft and evidence that its subscription and multi-platform focus is finally paying off. The game has amassed more than 6 million players since Spencer's statement.
• "We're really interested in the metaverse style of how people watch the show. We're starting to explore the idea of finding new ways to distribute it using games and game technology. That's actually kind of our next platform, right? We're a show about video games, so of course, we should be airing it inside of video games if we can." ―Games Awards founder and host Geoff Keighley told journalist Brian Crecente that the future of the show will involve leaning into the metaverse and finding ways to reach gamers inside virtual worlds instead of through traditional video platforms.

Lootbox

On Protocol: Unity last week agreed to acquire film director Peter Jackson's Weta Digital visual effects studio for more than $1.6 billion, positioning Unity to better compete with rival Epic Games for the Hollywood slice of the game engine market.

Activision Blizzard concedes. After months of silence on whether Activision Blizzard would meet any employee demands, the company agreed to improved working conditions for contractors, including paid time off, a pay raise and sick leave, among other benefits, Gamesindustry.biz reported .

Tencent buys a Nintendo Switch developer. The Chinese gaming giant has acquired the Japanese studio behind Nintendo games Ninjala and Travis Strikes Again: No More Heroes, Bloomberg reported last week . It's a unique investment for Tencent, which has favored smaller minority stakes in Japanese game makers.

PUBG's next chapter. The battle royale hit that started the global trend now has a sequel in the form of the mobile-only PUBG: New State, which South Korean publisher Krafton released last week. The futuristic take on the survival game has already amassed millions of downloads on Android and iOS.

Apple denied in ongoing Fortnite battle. The judge in the Epic v. Apple case told the iPhone maker last week it would have to comply with the case's September ruling forcing it to allow links and buttons to external payment options, setting a Dec. 9 deadline for the implementation of new rules . Apple said it will appeal to the Ninth Circuit.

PlayStation 5 celebrates its first birthday. While the original Xbox turned 20 on Monday, Sony's PS5 turned 1 last week, and the company celebrated by revealing the most-played games on the platform . Unsurprisingly, many of them are not PlayStation exclusives, but are instead multi-platform online games like Fortnite, Call of Duty and Destiny 2.

Genshin Impact developer expands to North America. Chinese studio miHoYo said on Thursday it's opening a new studio in Montreal to attract North American talent and "focus on creating a brand-new AAA open-world action-adventure game," which the developer said will be a shooter set in a "living, breathing paranormal world."

Nintendo wins back the console sales crown. The Nintendo Switch was once again the bestselling console in the month of October by unit sales, according to NPD Group, thanks in part to the Switch OLED model. The Verge reported that the newer version accounted for nearly half of all Nintendo console sales last month.

Xbox turns 20. Microsoft celebrated its 20th anniversary of the Xbox on Monday with a celebratory livestream announcing a documentary about the creation of the console, some much-appreciated backward compatibility support for 75-plus new titles and the surprise launch of a beta version of Halo Infinite's free-to-play multiplayer.

Gaming events coming back, but vaccinations required

After almost two years of mostly all-virtual events, 2022 might be when gaming and tech conventions, industry conferences and esports competitions come back to life. While we've seen a number of events and organizers try hybrid models, many have struggled to balance mask mandates, testing requirements and vaccination proof with local guidelines and safety recommendations.

That looks like it could be changing. PAX, due to its regional approach, has been maneuvering in-person event logistics more than most organizations. On Monday, it announced that PAX East in 2022 will require proof of vaccination to attend, alongside an indoor mask mandate. The same is true for CES, which returns to Las Vegas in early January. The organizers of E3 2022, scheduled for June in Los Angeles, have yet to detail their health protocols, but it seems likely vaccine proof will be on the list.

A MESSAGE FROM BLOCKCHAIN.COM

The Blockchain.com Wallet is the easiest and most powerful crypto wallet, trusted by millions since 2011 with over $1 trillion in crypto transactions. Whether you want to trade, earn, custody, or access full-stack institutional solutions, Blockchain.com is a market leader in retail and institutional crypto products.

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