Microsoft is considering releasing its next-generation Xbox console in collaboration with third-party hardware manufacturers. This is stated in an internal memo from Asha Sharma, head of the company's gaming division, where she described serious problems associated with the rising cost of components for gaming systems.
According to the executive, the new console project has faced an unprecedented increase in the cost of key components. Prices for storage and memory have risen particularly sharply, making the traditional Xbox production model increasingly unviable.
We are experiencing a hardware component crisis. We cannot produce as many consoles as players are willing to buy right now, and we need a new business model and hardware partnerships as we remain committed to Project Helix.
Microsoft traditionally sells Xbox consoles with minimal profit or even at a loss, hoping to offset costs through game and service sales. However, the current rise in component prices significantly increases the financial burden. According to the company's estimates, by the 2027 holiday season, the cost of some components could be more than five times higher than two years ago.
Sharma also noted that after she took office in February, prices for console storage devices were more than double last year's level. Since then, they have doubled again, with further increases expected in the coming years.
Against this backdrop, Microsoft may switch to a model resembling the video card market. In such a scenario, the company would create a reference Xbox platform, and partner manufacturers — for example, ASUS and other OEM companies — would be able to release their own versions of the console with different specifications and prices.
A similar approach was previously used by AMD and NVIDIA in the graphics accelerator market, as well as Valve with the Steam Machines platform in 2015. At that time, various manufacturers, including Alienware, Dell, and Zotac, released their own versions of gaming devices based on SteamOS. However, the project failed to achieve success due to the high cost of the devices compared to traditional consoles.