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The long-rumoured Xbox handheld may have been cancelled before it ever reached production. According to well-known hardware insider KeplerL2, Microsoft scrapped its in-house handheld project after AMD required a commitment of 10 million+ units to justify developing a dedicated SoC (System-on-a-Chip).
In a forum post (spotted by Reddit), Kepler explained that AMD needed firm commitments from partners to make the research and development investment worthwhile. Microsoft, however, reportedly saw the numbers from the handheld PC market with Valve’s Steam Deck selling around 5 million units and ASUS ROG Ally and Lenovo Legion Go moving only 1-2 million units each, and ultimately decided against taking the risk.
Instead, Microsoft has increasingly leaned on partnerships to make its mark in the portable space. The most notable example is the ASUS ROG Xbox Ally, which ships with Xbox branding and Game Pass integration, effectively allowing Microsoft to compete in the handheld market without manufacturing a device itself.
This revelation contrasts earlier claims that Microsoft’s next-gen lineup, targeting 2026, would include two SKUs: a traditional console and a handheld device similar to the Nintendo Switch. At the time, the rumor suggested Xbox was preparing to join the handheld market directly, rather than relying solely on cloud and partnerships with the likes of Asus.
If Kepler’s report holds true, Microsoft’s hardware strategy may once again be focused on traditional consoles and cloud expansion, leaving the growing handheld gaming market to Valve, ASUS, and Lenovo.
As always with insider reports, these details should be taken with caution until Microsoft provides official confirmation.
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