This already swiftly growing industry has had a boom year due to COVID-19. What will the rest of the year likely bring on the gaming front?
From the rise of esports leagues to consoles becoming nearly ubiquitous features in homes around the world, gaming was already on a growth trajectory. But, before the COVID-19 situation took hold globally, it would have been hard to anticipate the further spike we’ve seen.
Between stay-at-home orders, social distancing, and a need for comfort, connection, and distraction in this uncertain time, the global gaming industry has thrived while others – like retail and hospitality – have taken critical hits in the new normal we’re all inhabiting.
A rigorous first quarter
Q1 of 2020 was a strong one for gaming companies, with U.S. sales of $10.86 billion between January and March – an increase of 9% from the previous year. New gaming releases (with the perfect timing of falling right amid the first broad sweep of global stay-at-home orders) helped drive this. Animal Crossing: New Horizons, especially, became the iconic game of quarantine, with its peaceful village setting and focus on connection filling a vicarious need for many players.
That need translated into sales of more than 22 million copies, with a record-setting first quarter helping drive Switch sales. Though Nintendo was challenged by supply issues earlier this year, the company shipped 5.68 million Switch consoles last quarter – an increase of 166% over the previous quarter – bringing total sales for the system to 61.44 million as of the start of August.
Homebound Q2 pushing continued growth
With many people still sheltering at home, Q2 amplified the growth trends the gaming industry saw during Q1. In the U.S., game-related spending hit a new Q2 record, with gamers spending $11.6 billion – a 30% increase over the previous year and a 7% increase over Q1’s (more than) healthy numbers. Gaming hardware, specifically, saw a 57% increase over 2019, with strong sales for the Nintendo Switch, Xbox One, and PlayStation 4 – even with next-generation consoles expected later in the year from both Sony and Microsoft.
Another unexpected development arose in the esports sector. While leagues’ live events saw widespread cancellations due to health precautions, traditional sports leagues around the world embraced esports tech to engage with fans, including showing esports competitions on live TV in place of scheduled sports content made impossible by the pandemic. One such NASCAR event gathered 1.3 million viewers.
As of April, the global video game market was forecast to be worth $159 billion in 2020 – nearly four times box offices’ 2019 revenues of $43 billion and around three times the music industry’s 2019 earnings.
The gaming market is only growing – so what can we expect from the rest of 2020?
Major next-gen console releases to close out the year
Though there have been questions about how the pandemic will affect major console releases later in the year, both Sony’s PlayStation 5 and Microsoft’s Xbox Series X are currently still anticipated to be on schedule for the 2020 holiday season. A major player supporting both consoles is AMD, whose custom chips, Zen 2 CPUs, and RDNA GPUs support many of the capabilities (and much of the power) that will differentiate the two consoles from their previous incarnations.
AMD CEO Lisa Su shared that the company’s product launches are still on schedule for their 2020 release and that AMD has already begun initial production and shipment of these next-gen console chips.
So – in addition to the cutting-edge AMD components – what all goes into these two new consoles?
The Xbox Series X is expected to be “an absolute powerhouse” with internal hardware comparable to gaming PCs. Touted as twice as powerful as the Xbox One X, the machine will run on an eight-core AMD Zen 2 processor and a custom RDNA 2 AMD GPU with 12 teraflops of processing power to support ray-tracing capabilities, providing photorealistic lighting. Backed by 16GB of GDDR6 memory and a swift 1TB custom NVME SSD, the console is expected to have potential 8K capabilities and backwards compatibility with four previous generations of Xbox games.
Microsoft will also be releasing a less-expensive next-gen Xbox (codenamed Lockhart) that is expected to run on the same CPU as the Xbox Series X and include 7.5GB of usable RAM and about four teraflops of GPU performance. We’re rumored to be getting more details this month.
The PS5, expected to release within the same late-November window as the Xbox Series X, will also be a heavy hitter in terms of power and processing. It will run on an AMD Zen 2-based CPU with eight cores running at 3.5GHz, plus a custom RDNA 2 AMD GPU that puts out 10.28 teraflops of processing power. The architecture will be strengthened by 16GB of GDDR6 memory and a super-fast custom 825GB SSD that is expected to eclipse the PlayStation 4’s processing speeds, running at 100 times faster, according to Sony CEO Kenichiro Yoshida. The PS5 will also feature ray-tracing and backwards compatibility with a vast selection of the PS4 game catalog.
Like Microsoft, Sony will also be releasing a second, more economical next-generation option in the form of the slimmed-down, disc-free PS5 Digital Edition.
Sony’s next-gen PS5 game console shipments are estimated to reach at least 120 million units in the next five years after launch, roughly twice those for Microsoft’s Xbox Series X, according to sources of its backend supply chain in Taiwan.
Next-gen consoles’ effects on demand
Major manufacturers are already forecasting how they expect the next generation of gaming consoles to change the demand landscape around the systems’ components. In June, Micron discussed its expectation that the new consoles will drive stronger DRAM and NAND demand into 2021. SK Hynix echoed this outlook in a July announcement, citing new game systems’ average 40% higher DRAM content than previous models and architectures’ use of SSDs over HDDs for the first time.
SK Hynix further detailed how they expect new game consoles’ average 800GB SSD content to account for about 5% of the overall NAND demand in 2H2020.
“We believe this trend will be a driving factor in not only the demand for memory in SSD but also in the overall NAND market,” the company stated.
The gaming industry – leveling up
While it’s difficult to fully anticipate how pandemic dynamics and industry evolution in general will continue to drive the gaming industry, 2020 has evidenced (and reinforced) clear trends that the electronic component industry should heed.
Gaming, in its many manifestations – from esports stadium events to online communities playing together while isolated in the safety of their homes – is a powerhouse industry whose technical requirements change the map of industry-wide demand. And it’s only growing from here.
Keep an eye out here on our Market Blog and our LinkedIn page for more industry news and analysis.