Microsoft slowly moves Xbox console production out of China

Right as a new console generation looms, Microsoft will reportedly start to pull production of Xbox consoles out of China.

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Microsoft has plans to pull most of its product manufacturing out of China throughout 2026, sources tell Nikkei Asia. This new strategy is said to include Xbox console hardware, although some parts of console production may remain in the region.

The news comes after Microsoft raised the price of its Xbox consoles two separate times throughout the year, increasing MSRP once in May and then again this month in October. The price hike was a move to counter international tariffs that hit Microsoft particularly hard, seeing as the company does not sell its systems at a profit and takes a calculated loss of each sale. As a result, Microsoft's flagship Xbox Series X console now retails for $650, more than a +30% increase in price since release.

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"The scope is quite wide and covers components, parts and product assembly for new product introductions of both notebook computers and server products. Microsoft hopes all of these can be manufactured entirely outside of China starting from 2026 at the earliest," unnamed sources tell Nikkei.

Microsoft is currently planning out a new fleet of next-gen gaming hardware, and figuring out a more profitable--and sustainable--production supply line may be critical for the Xbox business.

Xbox president Sarah Bond has recently re-confirmed that new Xbox hardware is currently in the prototyping and design phases. The next-gen hardware lineup will include PC, console, handheld, and cloud, although exact specifics on each remain unclear.