Console market faces steep decline as chip costs surge

The global video game console market is facing a sharp downturn as soaring semiconductor costs drive up hardware prices, while AI-assisted hacking and the rapid growth of cloud gaming threaten the industry’s traditional business model.

Worldwide console shipments are projected to fall 19.5 percent to 33.9 million units this year from 42.1 million in 2025, according to S&P Global Market Intelligence. The research firm expects shipments to decline further to 27.1 million units in 2027, a drop of 15 million units over two years.

The slump comes despite the release of major game titles, including Grand Theft Auto VI and Call of Duty: Modern Warfare 4, underscoring the mounting pressure on console makers.

Industry officials point to surging semiconductor prices as a major factor behind the slowdown. The price of a 16-gigabit GDDR6 memory chip used in gaming consoles has more than doubled from about $3.50 in early 2025 to $7.60 recently, pushing up manufacturing costs and retail prices.

Major console makers, including Microsoft, Nintendo and Sony, have all raised prices this year.

Nintendo’s South Korean unit raised the suggested retail price of its Switch 2 console to 758,000 won ($570) in September, up 16.9 percent from 648,000 won.

Sony raised the price of its standard PlayStation 5 in May from 748,000 won to 948,000 won, while the digital edition without a disc drive jumped 43 percent from 598,000 won to 858,000 won.

Microsoft also increased Xbox prices worldwide in August, adding $100 to the 512-gigabyte model and $150 to the 1-terabyte version.

“Rising console prices have weakened consumer demand,” an industry official said. “With semiconductor prices unlikely to fall anytime soon, manufacturers have little choice but to wait for consumers to accept the higher price levels.”

Shipments are expected to recover modestly to 29.3 million units in 2028, when semiconductor prices are forecast to stabilize.

Beyond hardware costs, the spread of AI-powered coding tools is creating new challenges for console security.

Such tools are lowering the technical barriers to circumventing console security systems and modifying games designed for proprietary hardware to run on personal computers. Previously, these techniques required specialized expertise, but AI-assisted programming has made them more accessible.

The growing risk of unauthorized copying and software modification could further undermine consumers’ incentives to purchase expensive consoles and legitimate game titles, raising concerns about the industry’s ability to protect its software ecosystem.

Meanwhile, cloud gaming is emerging as another structural threat.

Consoles once offered one of the few practical ways to play graphics-intensive games, but faster internet connections and the expansion of 5G infrastructure are increasingly allowing consumers to stream high-quality games on ordinary PCs and smartphones.

According to Grand View Research, the global cloud gaming market is projected to expand from $4.9 billion this year to $21 billion by 2030.

The growth has prompted Microsoft, Amazon and Nvidia to expand services that allow users to play demanding games through cloud platforms without purchasing dedicated gaming hardware.

“The weakness in console sales reflects a broader shift in the gaming industry from hardware-centered platforms toward network-based software services,” another industry official said.