As powerhouses like Amazon enter the gaming technology market, competition — and need for parts — intensifies
The Covid-19 pandemic — which has spurred many people stuck at home to look for new sources of entertainment — has been a boom for the gaming industry and a headache for supply chain managers serving the same.
Big players have launched new gaming technology to take advantage of the skyrocketing demand. At the same time, supply chain difficulties have kept anxious consumers waiting for products. The electronics industry has seen some real upsides as well. With gaming comes a voracious need for memory as well as new gaming and cloud storage platforms to support players.
Gaming keeps growing
Gaming usage has been increasing for years, but recent events have made those numbers soar. Consider this:
- Three out of four people (244 million in all) in the United States play video games, an increase of 32 million people since 2018, according to a recent study from the 2020 Gamer Segmentation Report by The NPD Group.
- More people are using multiple devices. In fact, 65% of gamers now use more than one device compared to 59% in 2018.
- The gaming market has grown 7% compared since 2018.
“Video games are one of the primary ways friends and family are staying connected through a difficult time,” said Mat Piscatella, U.S. video games industry analyst at The NPD Group. “The growth in both the number of players across all gaming segments, as well as time spent gaming or watching gaming-related content, reflects the variety and depth of gaming experiences available regardless of device preferences, gaming interests or budget.
Increased competition for gaming technology
For decades, Sony and Nintendo have been the big names in the gaming industry. Now, other powerhouse brands have also joined the competition.
- Amazon: In September, Amazon began offering customers early access to its newly-minted Luna cloud gaming service that serves up instant play on a variety of devices ranging from iPhones (and soon Android), FireTV, PCs, and Macs.
- Google: In August, Google announced it had reached more than 100 games on its Stadia online platform, having added nearly two dozen games during the month, including PGA Tour 2K21 and DOOM.
- Microsoft: Microsoft has pledged to launch Project xCloud, which allows gamers to access games in the cloud from a phone or tablet—an offering that will be delivered to Xbox fans who subscribe to the company’s Game Pass Ultimate.
Despite demand surge, long-term growth in question
In the wake of the pandemic, many consumers have sought to upgrade their gaming platforms and report finding the products they want is difficult. For example, users have had to search for weeks or even months to purchase Nintendo Switch video games.
In March, Switch sales boomed, reaching 800,000 in the last week of March, compared to 200,000 the week before, Fortune reported. At the same time, high-producing Chinese factories were closed due to the pandemic. Shortages continued in late August — and prices went up by a third or more.
In anticipation of increased demand for PlayStation 5 consoles, Sony is ordering at least 50% more units than it had originally planned to ship this year, according to Research and Markets. Facebook is also boosting production of Oculus VR headsets, aiming to produce up to two million units in the second half of 2020, the report said.
These surges in demand may still not result in long-term growth for hardware makers. Research and Markets believes that the gaming console market will represent $7.17 billion of global sales in 2026, compared to $9.8 billion in 2021, a compound annual growth rate of -5.1%.
Market is catching up to demand
At the same time, some of the supply chain woes reported last spring have been mitigated. Cloud service and online application providers have in the past few months started stockpiling memory to get ahead of the demand curve caused by the sudden rise in at-home workers. Now, with buyer inventory at a high, memory prices are softening. Market analysts are predicting that DRAM and NAND prices will drop by at least 10% in the fourth quarter of 2020 with the downturn continuing into the first half of the year, which is good news for buyers.
The memory market will continue to grow. Data Bridge Market Research expects the worldwide NAND market to grow to $44.60 billion by 2027 at a compound annual growth rate of nearly 5% annually between 2020 and 2027.
To summarize: After facing pandemic-induced sourcing challenges, demand for gaming technology presents new opportunities for electronics OEMs.
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