Console Shipments Forecast to Decline 19.5% in 2026 Due to Rising Costs

Component Shortages and the $800 Console

The gaming hardware market is currently grappling with a severe supply-side constraint that threatens the traditional console business model. Artificial intelligence infrastructure projects are absorbing chip supply at a scale that leaves little room for console manufacturers to maintain current price points.

View this post on Instagram about Global Market Intelligence, Peter Moore

“I think that’s probably what the hardware manufacturers are noodling right now is, the cost of making this stuff is now getting ridiculous. We can’t compete. We can’t even get supply for what we need because the chip manufacturers are fueling artificial intelligence demand. And they’re looking at [consumers] and probably say, ‘We can’t make enough profit on you.'” — Peter Moore, former Sega of America president and former Microsoft gaming VP

This hardware crisis is fundamentally altering the market’s trajectory. Industry analysis from S&P Global Market Intelligence, as reported by GameSpot, suggests that the industry is facing a compounding problem of aging or expensive hardware and a thin slate of major software releases. The forecast warns that if manufacturing costs do not stabilize, consoles could shift from mass-market entertainment devices to premium luxury products, with prices potentially reaching the $600 to $800 range for next-generation hardware. Moore emphasized that gaming hardware has historically not been a moneymaker, but rather a method to an end, a way to funnel consumers into content-spending ecosystems like subscriptions, software, and add-ons. Because chips are actually priceless and “these are gems” due to the AI growth, manufacturers are in a spiral as they attempt to balance production costs with the maximum amount consumers are willing to pay.

Industry Outlook and Shifts

The gaming industry is currently managing a series of significant setbacks. Massive layoffs in Microsoft’s gaming division have led to speculation that the release of The Elder Scrolls VI may be postponed. Meanwhile, consumer behavior is shifting; reports indicate increased interest in hacking PlayStation 5 consoles, and Sony’s recent stance on physical media has drawn criticism from figures including actress Sasha Grey. Amid these shifts, developers are adapting, with Pearl Abyss already working on a version of Crimson Desert for the Switch 2, with many observers looking forward to the results of their optimization efforts.

S&P Global Market Intelligence analyst Neil Barbour projected that upcoming consoles, specifically the PS6 and Microsoft’s Project Helix, will likely sell for between $600 and $800 each. The firm predicts that console shipments will fall to approximately 27.1 million units by 2027, though a recovery to 37.4 million units is possible by 2030 if the component crisis begins to stabilize by 2028.

Innovation or Obsolescence: The Future of Gaming Hardware

As prices rise, industry veterans are questioning whether the traditional console model can survive without significant evolution. The debate over the necessity of a dedicated gaming box is intensifying. Moore has discussed the constant speculation regarding whether consoles might eventually die off, replaced by streaming games directly to televisions or other platforms. He noted that every new generation, console producers participate in excruciating discussions to estimate the maximum price consumers will pay, accounting for DLC, microtransactions, advertising, and manufacturing costs. When these variables are combined, the current skyrocketing price of chips makes it difficult to maintain the traditional hardware-plus-software profit model.

Market Projections for 2026 and Beyond

The broader console market is expected to contract sharply before any potential stabilization occurs. Analysts note that while the Nintendo Switch 2 is likely to continue to dominate the market, the industry as a whole should see demand slow as customers become more hesitant to invest in increasingly pricey gaming devices. If hardware costs continue to rise toward the $1,000 level, analysts suggest that consoles will slowly become a premium luxury product rather than a general entertainment device.

Platform 2026 Forecast (Units) Market Context

• Nintendo Switch 2: 17.1 Million (Expected to lead)
• PlayStation 5: 13.2 Million (15.2% year-on-year decrease predicted)
• Xbox Series X|S: 2.5 Million (Reflecting broader industry contraction)

Analysts believe that if the component crisis eases by 2028, the industry could see a recovery. Until then, publishers and developers continue to navigate a climate defined by cost-cutting and restructuring, as the sector faces one of the hardest periods in years.

=== END ARTICLE ===