Microsoft preferred to use Xbox Series X chips on Cloud Gaming servers instead of consoles

Finding an Xbox Series X in stores was really difficult until very recently, a situation that has always been blamed on high demand and a lack of chips. It is true that manufacturers could not cope, but it is also true that since the launch of the new generation Microsoft prioritized the use of Xbox Series X chips to mount Xbox Cloud Gaming (xCloud) servers, instead of using them in consoles for later put them up for sale. Once again, this is information that comes to light thanks to the Microsoft vs. FTC.

The Verge has had access to a series of emails between Phil Spencer, CEO of Microsoft Gaming, and Tim Stuart, CFO of Xbox, discussing Xbox Series X supply issues. In the email exchange, which took place in December 2020, Spencer is in favor of retaining Xbox Series X chips for use on Xbox Cloud Gaming servers, a decision that exacerbated console supply shortages but allowed the company to expand its gaming bet on the cloud.

Xbox Cloud Gaming blade servers are custom boards with the Xbox Series X chip. Less than a year after the console’s launch, the cloud service was already running entirely on next-generation hardware. It’s unknown how many Xbox Series X units Microsoft sacrificed to meet its cloud ambitions, but Spencer says in the emails that its “investments in xCloud and content are critical.”

The emails also reveal that Microsoft decided to reduce the computer units Xbox Series X from 56 to 52 to improve the console’s production rate, but still fell short of the target. Despite this, Spencer did not change his strategy of sacrificing Xbox Series X sales to feed Xbox Cloud Gaming servers.

Now that a little over two years have passed since the emails were sent, we can say that Spencer’s strategy was not the most successful. For one thing, retailers received less Xbox Series X than Microsoft could actually offer at a time when the market demanded more units than could be made. And on the other, Microsoft’s plans and ambitions with Xbox Cloud Gaming, which to this day is still a complement to Xbox Game Pass Ultimate, does not seem to have been fulfilled.

Microsoft has acknowledged during the trial with the FTC that it worked on a separate version of Xbox Cloud Gaming, but that ultimately the idea did not come to fruition. The company does not rule out that this initiative is back on the table, but for now the cost and popularity analyzes are not encouraging. The technology company is also developing the Keystone, a streaming device for Xbox Cloud Gaming whose launch has been delayed due to its price.