Why $700 could be a “death sentence” for the Steam Machine

Bad news especially for Valve?

On the surface, it might seem like every company making gaming hardware would be equally affected by rising component costs. In practice, however, analysts suggested that Valve may be uniquely poorly positioned to weather this ongoing market disruption.

Big console makers like Sony and Microsoft “can commit to millions of orders, and they have strong negotiating power,” said Niko Partners analyst Daniel Ahmed. The Steam Machine, on the other hand, “is a niche product that may not benefit in the same way in terms of purchases,” meaning Valve faces higher component cost increases.

F-Square’s Footer echoed that Valve “isn’t a huge player in the hardware sector, even after the success of the Steam Deck. So they probably don’t have the same priority as Nintendo, Sony, or Microsoft when it comes to suppliers.”

The size of the Steam Machine price adjustment may also depend on when Valve made its supply chain commitments. Tech Insights analyst James Sanders said, “It’s unclear when and if Valve closed the supply contract for the Steam Machine, or whether supplies could be diverted from Steam Deck for the new product.” On the other hand, “Sony and Microsoft likely would have achieved more favorable component pricing before the current surge,” Van Drunen said.

That said, some other aspects of the Steam Machine design could give Valve some more pricing flexibility. Sanders said the Steam Machine’s smaller physical size could mean smaller packaging and lower shipping costs for the valve. That said, and selling the system primarily through direct sales through the Web and Steam keeps the typical retailer markups console makers have to take into account.

Cole said, “I think Valve was expecting a very low price and that the component issue would be short-lived.” “Obviously this looks like a long-term problem.”