Microsoft is reportedly partnering with Foxconn to expand Xbox manufacturing by “4.8 million” devices per year — as Grand Theft Auto 6 looms

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As an analyst, I’m seeing continued challenges with Xbox Series X|S hardware. It seems like no matter what – whether it’s problems with getting enough consoles made or tariffs increasing costs – the supply just can’t keep up with demand, and prices are feeling the impact.

When President Trump started a trade dispute with China, prices went up on many different goods. Video game consoles were especially affected, as they weren’t given the same tariff breaks as other electronics. For instance, iPhones made by Apple were protected from these tariffs to support a major American tech company, but the same consideration wasn’t given to Xbox, the only video game console maker still based in the U.S.

When the Xbox Series X and S first launched, Microsoft had a strong start, even outselling the PlayStation 5 in the U.S. for a short time. However, PlayStation 5 quickly ramped up production and began to dominate sales. Xbox sales have been falling almost every quarter for the last two years, and things got worse when Microsoft had to increase prices. This made the Xbox Series X, and sometimes the Series S, more expensive than certain PlayStation 5 models. Increased tariffs have significantly impacted Xbox’s ability to compete on price.

To lessen the impact of rising costs, companies like Sony PlayStation and Nintendo are shifting some of their manufacturing from China, which was heavily affected by tariffs imposed under the Trump administration. Vietnam has been a major beneficiary of this trend, becoming a more prominent player in electronics manufacturing, and now includes Xbox production among its capabilities.

Reuters reports that Foxconn and Luxshare, two major electronics manufacturers, have filed plans with local governments to expand their production of video game consoles.

I’m seeing reports that Fushan Technology, a company owned by Foxconn, is applying for permits to manufacture Microsoft Xbox consoles. They’re hoping to produce up to 4.8 million more Xbox devices, including the Series X|S consoles, controllers, and headsets – they might even be building the servers for Xbox Cloud Gaming. It’s worth noting that the Xbox handheld, the Ally, isn’t part of this – ASUS makes that one, even though it carries the Xbox name. Interestingly, another company, Luxshare-ICT, is also proposing to increase their console production by 4.5 million units each year.

Microsoft is sharing the processing power (silicon) used in its Xbox Series X consoles between the consoles themselves and the servers that power Xbox Cloud Gaming. This is helping them grow cloud gaming access in countries like Brazil and India, where the cost of buying Xbox hardware is especially high due to taxes and tariffs. Despite a decrease in available Xbox Series X|S consoles, Microsoft has seen Xbox Cloud Gaming usage increase by 45% compared to last year.

Xbox is still in the game

I often get asked on social media if Xbox is planning to stop making consoles. Microsoft has confirmed they *are* planning a next-generation Xbox, and it will be designed more like a PC, able to run games and apps from Steam and other Windows platforms. Another reason for the confusion is that it can be hard to find the current Xbox Series X and S consoles in stores.

Microsoft didn’t offer any discounts on the Xbox Series X or S consoles during Black Friday and Cyber Monday because they didn’t have enough stock. They’re working to improve production by sourcing parts from more suppliers, which is important because this year could be very successful for Xbox. However, limited availability and rising prices of key components like DRAM could make it difficult to increase production for everyone in the industry.

For the many Xbox One X and Xbox One S owners, the release of Grand Theft Auto 6 will probably drive a large wave of console upgrades, similar to what happened when the Xbox Series X|S first came out in 2020.

As an analyst, I’m seeing a critical need for Microsoft to ensure ample Xbox Series S and X stock for the launch of Grand Theft Auto 6. The game is exclusive to Xbox Series X|S and PS5, and the Series S, potentially being the most affordable entry point, could drive significant sales – *if* Microsoft can keep it in stock. Availability is going to be a key factor here.

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2025-12-04 08:10