What could Valve do with the Steam Machine...?

I've been thinking some more about the Steam Machine's troubles and the latest summary article from Ars Technica has me thinking about what their options might be. 

So, let's explore the possible scenarios...

If all of the issues surrounding RAM and SSD prices are pushing up the unit price to unsellable levels then, as I see it, Valve has two possible ways out, depending on what has already occurred behind the scenes.

We now know that both the SSD and RAM are upgradable, meaning that the RAM takes the SODIMM form factor. 

This actually complicates things for Valve compared to companies like Sony and Microsoft because they are buying the modules directly to attach them to their custom circuit boards, whereas Valve needs to purchase a finished product. That's two levels removed! 

First their supplier/suppliers need to compete to get the modules from some combination of Micron, SK Hynix, and/or Samsung. Then they need to produce the DIMMs, taking into account binning to produce various different qualities, and then Valve needs to compete with other customers (typically OEM laptop and mini PC suppliers), along with supply that is meant for the direct to consumer market, i.e. us filthy peasants!

That just makes getting the physical modules more difficult in the first place - and a similar mechanic is occurring for the SSDs, too. Though we don't know what form factor that will be but it could be a 2230 m.2 device*, given the relatively small size of the Steam Machine and potential cost savings due to the associated economies of scale that having an overlap with the already existing Steam Deck would provide**.

*Yes, we know from Valve's post that the machine supports both 2230 and 2280 m.2 devices (why not 2242?!)

**At least for the 512 GB  version...

Given that we're having this conversation at all, it seems that AMD are, or will be, providing further quantities of the CPU and GPU in the Steam Machine for Valve to assemble with the circuit board. 

However, it's unclear whether this future quantity will be for continued maintenance of stock to sell through to the public or if it is delivery of the already agreed initial quantity Valve and AMD signed on for. 

Since AMD usually sells the GDDR with the GPU core, then I think we can assume that this is not the issue for Valve in terms of procurement difficulty - though AMD might want to renegotiate the price of the kit...

The LED indicator strip on the front of the device is really cool...

That distinction makes a difference because it defines the outcomes I theorise below:

First scenario:

If Valve already procured some quantity of RAM modules for assembly of the Steam Machines then the price for those first units are, or could be, set. 

However, with a highly volatile memory shortage, the smart strategy could be to not pay that game. 

In this scenario, Valve makes the 2026 version of the Steam Machine a limited run - not a truly volume product. The price is set by what they have in stock and when stock runs out, it's done. 

Valve doesn't receive extra units of the CPU and GPU. Though, in reality, I would say that they would be okay keeping the CPU for the next phase of this scenario as we see that CPU scaling is not necessarily the deciding factor at 1440p and 4K resolutions and the gen-on-gen advances for CPU are relatively minor - a decent modern CPU will last a gamer for multiple GPU upgrades...

Valve then reassesses the situation in 2027 and releases the Steam machine '27 or '28. This would be a new run with newly sourced RAM, SSDs and, potentially, GPU.

The beauty of this scenario is that it allows Valve to weather-out the memory storm, improve the situation for the GPU and actually release a product they can sell. 

Second scenario:

If Valve hasn't already procured the RAM modules, or if they have an imbalance in the CPU/GPU dies to DDR5 DIMMs, then they could go down a route floated by Tom over at Moore's Law Is Dead whereby they sell all or part of the Steam Machine inventory without storage or memory.

This allows Valve an escape route from already bought-up and depreciating inventory whilst still getting the hardware out there.

Thinking Things Through...

The first scenario really depends on whether the GPU is provided full-furnished with the GDDR6 and whether both the CPU and GPU are provided as a single volume shipment or an already pre-agreed ongoing manufacturing at TSMC and whether that agreement with AMD could be re-negotiated, or not.

The benefit to Valve of scenario 1 is that they will manage to sell what they produce. i.e. having the product in a limited quantity (say, a few million at most) means that they will be able to find consumers willing to pay virtually any price - within reason - to own a piece of gaming history; to support Valve and Linux-centric gaming; etc. They get to release the product, receive data from a large-enough install base and 

There will be no stock left lying around.

The potential negatives to Valve are the cost of development not being recouped, other component prices becoming greater due to reduced order numbers, and also some negative press (though I think this would be minor) when they run out of stock...

Pairing the existing CPU with potentially a new GPU in 2027 or 2028 with more VRAM capacity could also bring huge benefits but would require new development for the motherboard and heatsink design modifications. This would be a more capable device and would be able to reach 1440p upscaled to 4K with higher quality settings. I'm struggling to see a downside to this point other than the added cost of development.

Moving on...

Personally, I find the second scenario unlikely because it negates the point of the Steam Machine and doesn't grow Valve's market or mindshare. A barebones Steam Machine is not equivalent to a barebones pre-built PC or laptop. 

Valve isn't really selling the hardware, they're attempting to sell the ecosystem and that conceptual difference means they are likely to make different decisions to companies whose sole purpose is to move software agnostic hardware bundles.

There are also implications for Valve's support team(s): shipping half-finished hardware might lead to more support-related queries, along with potential claims for refunds if the user is unable to manage the hardware and software installation process.

There are absolutely benefits to shipping a product fully formed.

Valve seems a little cursed when it comes to the Steam Machine...

Conclusion...

I think Valve do have a few avenues out of this situation but there is no clean escape available to them. Luckily, they are propped up by the other parts of their business so a short term financial loss on one product won't lead to their untimely demise...

The question will be which contracts are locked-in and immutable, which can be renegotiated? What hardware is already in-hand, what is on order, and what is already paid for?

I was quite underwhelmed by the announced specifications of the Steam Machine but the situation surrounding memory and storage might lead to a better outcome for consumers if Valve makes any decision that leads to them reducing the scope of this particular stage of the project...