Microsoft’s Next Move in the Gaming Industry: Building an Xbox Handheld Console

The gaming industry has seen a significant shift in the past few years, with the rise of handheld gaming devices and cloud gaming services. Nintendo’s Switch has been a massive success, and Valve’s Steam Deck has brought PC games to the palm of your hand. Sony’s PlayStation, on the other hand, has yet to make a significant move in the handheld gaming market. Microsoft, however, has an opportunity to make a splash in this space by building an Xbox handheld console.

Microsoft’s current position in the gaming industry is not ideal. The company’s Xbox Series X and S have underperformed in terms of sales compared to their competitors, and Xbox Game Pass, while a great service, has not been enough to attract customers to the Xbox ecosystem. Microsoft’s acquisition of Activision Blizzard has given the company a significant boost, but it’s not enough to compete with Sony and Nintendo.

Microsoft’s response to this situation is expected to be a seismic shift in strategy. The company is rumored to be planning to bring Xbox exclusives to PlayStation and Nintendo Switch. While this move may be disappointing to some Xbox diehards, it’s a smart business decision that could help Microsoft reach a larger audience. However, there’s another way Microsoft could demonstrate hardware leadership and build a console worth buying. Microsoft could harness the incredible flexibility of Windows to build the best Nintendo Switch competitor ever made.

Handheld gaming is the future, and the world has been waiting for Microsoft to make its move. We’ve tried phones with attached gamepads and cloud portables, but nothing has lit a spark like the dedicated Nintendo Switch and Steam Deck. Handheld PC makers are crying out for a piece of the action, but they’re struggling to create a seamless experience. Microsoft could beat them, or join them, if it’s willing to take the reins.

Imagine an Xbox handheld console that looks like a Steam Deck but is designed by Microsoft’s design teams. It would be comfortable and sleek, with an Xbox interface where all your Xbox games, PC games, and cloud games live side by side. You could pick “Play Halo” wherever you are in the world, and your handheld would deliver the best version possible, whether that be locally downloaded, streamed from your home Xbox, streamed from the cloud, or a combination of all three. You could pick up right where you left off on your TV or vice versa, and play with your friends across both Xbox and PC.

Microsoft already has the technology to make this happen. Xbox Game Pass Ultimate subscribers can already download a copy of Halo Infinite to their PC or Xbox, or stream it from xCloud. The downloaded Xbox copy can be streamed to a Windows PC over your home network, and your saved games and friends can typically come along for the ride.

In 2013, I wrote about how console games and PC games were beginning to seriously merge. Sony and Microsoft started using AMD processors running on the x86 instruction set to power their hardware, making it easier than ever for developers to build a single game for PlayStation, Xbox, and PC. Microsoft released its biggest games on Windows PCs, and it seemed like Microsoft preferred it that way.

But when Valve released the Steam Deck, it was Sony, not Microsoft, that capitalized. The Steam Deck made PlayStation’s biggest games portable, and it made us buy games we would have otherwise purchased for Nintendo Switch. But that meant we were buying our games through Steam rather than paying Microsoft.

Microsoft could learn from this and create a handheld console that runs a compatibility layer or a virtual machine so your Xbox games just work optimally on a custom chip that gives it better battery life than today’s Windows handhelds. Microsoft is the company that pulled a rabbit out of the hat to make the x86-based Xbox One backward compatible with loads of Xbox 360 games. It’s the company that once spent $100 million just to refine its Xbox gamepad. It’s a company that’s repeatedly commissioned semi-custom processors for its Xbox consoles. Does anyone think AMD, Intel, or Nvidia would turn down the opportunity to do a custom part for an Xbox handheld?

Such a chip should match the graphical performance of an Xbox Series S, if not an Xbox Series X. The handheld might even play next-gen Xbox games if Microsoft’s dreams become reality by letting the cloud pick up the slack. Hideo Kojima’s OD is being built on Microsoft’s Xbox cloud, and the company had an internal vision for cloud hybrid games by 2028.

Microsoft can’t afford to miss this coming moment unless it’s abandoning Xbox hardware for good. With “multiple millions” sold, the Steam Deck isn’t a huge threat yet. But if the Nintendo Switch 2 is a success, and Sony decides to make a truly portable PlayStation to join it, Microsoft wouldn’t want to be the only one betting on a box instead.

In conclusion, Microsoft has an opportunity to make a significant move in the gaming industry by building an Xbox handheld console. Such a console would allow Microsoft to reach a larger audience, demonstrate hardware leadership, and fulfill its “play-anywhere” ambitions. Microsoft has the technology and the resources to make this happen, and it’s only a matter of time before the company makes its move. The future of Xbox is in the palm of your hand.