Microsoft warns Xbox needs new hardware model amid memory and storage cost crisis
Microsoft has published an internal memo sent to Team Xbox employees under the title “Next 100 Days: XBOX Reset.” The message, signed by Asha and Matt, outlines the company’s next phase after what it calls the first 100 days of reviving Xbox.
© Microsoft The memo confirms that Xbox is dealing with a hardware component crisis. Microsoft says console storage components were already more than twice as expensive in February as they were last fall. Those costs have since doubled again.
For the 2027 holiday season, Xbox expects another increase. The company now expects storage component costs to reach more than 5x the prices it paid two years earlier. Memory costs are said to have followed a broadly similar path.
We are in a hardware component crisis. When I joined as CEO in February, the price we paid for console storage components was over 2x as high as we paid last fall. These costs have since doubled again. And as we plan for the 2027 holiday season, we expect another significant increase, taking us over 5x the prices we paid only two years earlier. Memory costs have followed a broadly similar trajectory. While the entire industry is facing a components crisis, we believe we have been impacted more greatly than many of our peers due to the choices we made over the last half decade. We are currently unable to make as many consoles as players want to buy, and we need a new business model and partnerships for hardware as we remain committed to Helix.
— Xbox memory signed by Asha Sharma and Matt Brody
Project Helix at crossroads, OEMs might help
Microsoft says the situation affects console supply. According to the memo, Xbox is currently unable to make as many consoles as players want to buy. The company says it needs a new business model and hardware partnerships while it remains committed to Project Helix, its next-generation Xbox platform. This reads like Helix will indeed be made by 3rd party OEMs.
The financial context is also part of the reset. Microsoft says Xbox will end the fiscal year with about a 3% accountability margin, down year-over-year. Excluding Activision Blizzard King, the company says it spent more than $20 billion over five years on content, platform, and hardware subsidies, while annual revenue declined by nearly $500 million.
The Verge reports that Microsoft is now exploring “radically different” console business models. That may include new financing plans, subscription bundles, more flexible storage options, or more hardware partnerships. Microsoft has not announced a specific model yet.
Source: Microsoft Xbox , The Verge
