At Gamescom 2021, Microsoft announced that it will extend its game streaming service (Xbox Cloud Gaming) from PC and mobile devices to game consoles starting on Christmas Day this year. In addition to supporting the new consoles Xbox Series X/S, Xbox Cloud Gaming will also be compatible with the Xbox One models. TrendForce’s investigations indicate that the Nintendo Switch remains the mainstream option in the consumer market and is expected to reach 30.13 million units in annual sales for 2021. The PlayStation 5 consoles, which have been in severe shortage since its release, will take second place with annual sales of 17.61 million units, while the Xbox Series X/S will take third place with 8.66 million units sold this year.
Xbox One owners will comprise the majority of Xbox Cloud Gaming users on game console platforms
Microsoft has been making long-term efforts to promote cloud-based game streaming services. One such example includes the improvements that it made to its web browser to better support Xbox Cloud Gaming and permit the service to run on PC and mobile devices, with official PC and iOS releases taking place in June 2021. Microsoft’s announcement of game console compatibility with Xbox Cloud Gaming represents yet another step taken by the company towards its goal of extending game streaming services to all platforms.
As previously mentioned, Xbox Cloud Gaming supports not only the latest Xbox Series X and S consoles, but also the previous-gen Xbox One models. This wide compatibility can primarily be attributed to the fact that game streaming services have relatively low hardware requirements, thereby making it compatible across virtually all console hardware. The other reason is Microsoft’s aim to quickly expand the user base of Xbox Cloud Gaming. After all, very few people currently possess Xbox Series X/S consoles because these consoles have only been recently released, and their sale volumes have been constrained by the severe shortage of electronic components. Hence, the ability to quickly expand Xbox Cloud Gaming’s user base is contingent on adoption by current owners of Xbox One consoles, whose total cumulative sales are relatively high by now.
Going forward, Microsoft is expected to leverage the attraction of Xbox Cloud Gaming to draw consumers to purchase the Xbox Series X/S through the Xbox All Access installment payment plans. This is also why Microsoft is aggressively collaborating with and acquiring game developers, as having more games playable through Xbox Cloud Gaming will make the service more attractive to consumers.
Xbox Cloud Gaming will likely reduce the willingness of existing Xbox One owners to buy new consoles
Microsoft’s core strategy revolves around its platform and service. By attracting consumers through service first, Microsoft will then be able to raise the sales of its hardware. Put another way, increased hardware sales result in an expanded user base, which will further result in increased earnings through both platform and service.
Hence, the initial sales performances of the Xbox Series X/S are not a point of focus for Microsoft. If the company is able to expand its user base, Microsoft does not even necessarily need to ensure the popularity of the Xbox Series X/S. It can instead potentially release other modified models that are better suited for game streaming services or even simpler, dedicated game streaming boxes. However, in consideration of other services such as Xbox Live Gold, as well as earnings from players that do not subscribe to game streaming services, Microsoft must still maintain a range of game consoles that can compete with the PS5 in terms of specs.
Although Microsoft’s core strategy is in alignment with its software services for the PC market, such as Office and Windows, the heavy push for Xbox Cloud Gaming will inadvertently lower the console replacement demand of existing Xbox One owners. Furthermore, the difference in hardware specifications between the Xbox Series X and Xbox Series S will also complicate the software development process for game developers, in turn reducing the willingness of developers to create games for the latest Xbox consoles and affecting the sales performances of the Xbox Series X/S.
Therefore, it makes sense that despite the similar specs between the Xbox Series X and the PS5, their sales numbers differ wildly. At any rate, the Switch will remain the sales leader in the game console market in 2021, with the PS5 experiencing a gradual sales growth and the latest Xbox consoles lagging behind.
As the Taiwanese IPC (industrial PC) market suffered from deferred orders due to supply chain and logistical disruptions that took place in 1H20, total domestic IPC revenue for 1H20 reached NT$105.4 billion, a 4.7% YoY decrease, according to TrendForce’s latest investigations. However, given that the pandemic was gradually brought under control in 1H21, the market was able to benefit from strong demand from China’s 5G infrastructure rollout, as well as from expanded investments by Europe and the US in public infrastructures such as roads and railways aimed at facilitating an economic recovery. Hence, Taiwan’s IPC revenue for 1H21 reached NT$115.1 billion, a 9.2% YoY increase.
Regarding the financial performances of the top 10 IPC suppliers in Taiwan for 1H21, Ennoconn secured first place with a revenue of NT$42.95 billion, a 16.7% YoY increase. After its acquisition spree that began in 2010, Ennoconn is currently attempting to integrate its various subsidiaries’ technologies and resources in order to make headways in certain emerging technologies, including industrial automation, machine vision, HMI, and cloud services. Going forward, Ennoconn will cultivate its presence in the EV, smart healthcare, and smart retail sectors.
For 1H21, runner-up Advantech posted a revenue of NT$27.37 billion, an 8.2% YoY increase. While Advantech previously favored an acquisition-driven strategy, the company is now expanding into the smart healthcare, smart manufacturing, and smart city sectors primarily through technological partnerships and equity investments. Backed by its WISE-PaaS platform, Advantech continues to expand into the global markets by investing in overseas ISV (independent software vendors) and SI (systems integrators) in the aforementioned sectors.
DFI earned a third-place ranking in 1H21 with a revenue of NT$5.28 billion, a 25.2% YoY increase. After becoming part of the Qisda fleet in 2017, DFI subsequently went on to acquire telecom and information security solutions supplier AEWIN as well as industrial automation vendor Ace Pillar in 2019. These activities culminated in an annual revenue of NT$8.35 billion, an 18.8% YoY increase, for DFI in 2020. DFI currently specializes in smart manufacturing, smart healthcare, and intelligent transportation systems/infrastructures.
AI accelerator suppliers and IPC suppliers work in tandem to clearly define the AI value chain
IPC products have been widely used in AIoT and IIoT applications in recent years due to the proliferation of edge computing. As such, these products have also become the key determinant of how rapidly industries can adopt AI technologies such as machine vision. At the same time, IPC suppliers’ unique position in the mid-stream AI value chain means they are responsible for bridging the gap between upstream AI accelerator suppliers (including Intel, AMD, and Nvidia) and downstream ISV/SI.
With regards to the upstream AI value chain, Intel and AMD acquired independent FPGA suppliers Altera and Xilinx, respectively, in order to achieve more comprehensive heterogeneous computing competencies via horizontal integration. On the other hand, midstream IPC suppliers have been vertically integrating with downstream ISV/SI either independently or collectively through JVs, technological collaborations, strategic alliances, or M&A. For instance, Advantech and ADLINK are now operating on multi-strategy models as well as strategic collaboration models respectively, while Ennoconn and DFI are operating on M&A-oriented models.
On the whole, TrendForce expects that, as AI accelerator suppliers and IPC suppliers push integration forward in the AI value chain, not only will an increasing number of IPC products based on heterogeneous computing platforms be released to market, but emerging AI technologies such as machine vision will also see increased penetration in industrial automation applications. Hence, TrendForce expects annual machine vision revenue to reach US$86 billion in 2025.