Consumers wishing to give the gift of gaming this holiday season may be out of luck, as the PS5 and Xbox Series X, both released almost a year ago, will likely still be in short supply until mid-2022, said Lewis Ward, research director of gaming and VR/AR at International Data Corporation (IDC), a tech media and marketing services company.
Part of the problem is that production schedules were set in stone before significant changes to the market occurred due to the coronavirus pandemic.
“These things were locked in before COVID hit,” Ward said. “So they already had their assessment about how many they were going to sell, how many they would make, based on a baseline, which proved to be faulty.”
In 2019, both Microsoft (MSFT) and Sony (SONY) announced plans to release their respective consoles in late 2020. After the onset of the pandemic, both companies remained firm on their release dates. Despite the cancellation of E3, a major marketing conference within the video gaming industry, and several other pandemic-related issues with marketing events, Microsoft and Sony decided to release the consoles in November 2020 as planned.
“It's obviously introducing a level of complexity any business would prefer not to have to deal with,” said PlayStation CEO Jim Ryan on the impact of the pandemic on the PS5 release in a 2020 BBC interview. "But we're feeling really good about the supply chain, we're going to launch this year and we'll be global."
dtccBecause the pandemic increased the consumer base, demand far outstripped the established supply of PS5 materials.
Making the problem worse was the increase in work-from-home activity and digital employment, which caused an increase in demand for computer goods. As people entered lockdown and were forced to spend more time in the house due to quarantines, they generally had more time to play video games. The rising demand for games, and at-home-entertainment in general, lead to ballooning demand for the newest consoles. This supply-demand rift served as the primary cause for the shortage, Ward said.
“Many more people [are] having to stay at home,” Ward said. Job losses, social distancing requirements, and quarantining have led to a “massive influx in gaming” since 2020.
“You can see it across consoles, PCs, mobile devices, from just about every angle you look at,” Ward said. “So the issue was that demand far outstrips supply.”
Higher-than-expected demand was one factor leading to PS5 and other console shortages; another major component was the semiconductor shortage caused by the pandemic.
The severe shortage in semiconductor chips, which some industry executives have signaled may continue beyond 2022, began in 2020 after the pandemic disrupted supply chains across the world and halted industry production.
A variety of factors contributed to the shortage. For one, increasing production capabilities in the chip business requires expensive production overhaul and frequent retooling. Rifts between different industries reliant on chips emerged, with automobile manufacturers, smartphone companies, and computer makers all in need of scarce semiconductors.
Additionally, it has been difficult for semiconductor manufacturers to gauge the exact amount of chips they need to produce. Manufacturers have been placing orders for a greater number of chips than they actually need, in part because they fear that the entire order will not be filled. This has led to confusion on the part of semiconductor manufacturers, who struggle to determine how much to invest in production facilities.
“From the semiconductors to the SSDs … there are several components [of the new consoles] that have been supply constrained for various reasons,” Ward said. The supply schedule for these components is unlikely to be changed through the end of the year, but consumers can look for the middle of next year for a possible increase in availability. “We don't think it'll be until the middle of 2022, when some additional capacity will come online late this year.”
“We are making steady progress with available global supply and can’t wait for the day when everyone who wants a PS5 can easily get one,” said Veronica Rogers, SVP, Head of Global Sales and Business Operations at Sony Entertainment.
No word was given on a projected date for PS5s to become popularly available. Microsoft has been similarly silent on updates.
Ward noted that, although exact dates are hard to arrive at, we can expect that a balance between supply and demand should arrive sometime next year.
“We think it's going to be very tight in terms of what's available,” he said. “Many gamers are going to be unhappy, because they're going to continue to find it tough to get the consoles they want, very likely through the end of this year. But by the middle of 2022, we're estimating that there will be basically a rationalization between supply and demand. And things will get back to more of a baseline normal, if you will.”
Not in companies' interest to increase production
Increasing supply to meet consumer demand may not be in Sony’s best interest right now, Ward said.
“The supply may be available, and maybe they could crank out some more systems by paying overtime to the people on the assembly line or whatever else,” he said. “That's just going to incur more red for those companies. So they may not want to do it, because again, that could push the revenue generated per console further into the red.”
Increasing sales too far by increasing demand would drive costs up, and could reduce future sales in 2022 and beyond, he added. “So it's not necessarily a great idea for them to take advantage of all that demand.”
Finding a console
While it is by no means easy, and most consoles sell out within seconds of being listed online, many people have been successful in obtaining one. To date, over 16 million consumers have been successful in purchasing one of the latest consoles (either the PS5 or Xbox Series X/Series S).
Scalpers have made it even more difficult for consumers looking to buy a next-gen console. On sites like StockX and eBay (EBAY), the PS5 and Xbox Series X are available for upwards of $700 (while retail prices are usually from $400-$500). Some scalpers have employed bots to buy existing consoles as soon as they are launched on retailers websites, much to the chagrin of consumers looking to use the consoles.
Several sites have compiled news guides to help consumers looking to purchase a console for retail price. Websites such as CNet have a “PS5 tracker” which includes links to retailers selling the console and news on when drops become available to the public.
Ihsaan Fanusie is a writer at Yahoo Finance. Follow him on Twitter @IFanusie.
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