The gaming world is buzzing about the upcoming ROG Xbox Ally, but a new, tantalizing rumor suggests Microsoft’s path to a handheld console was almost entirely different. Instead of partnering with Asus, the tech giant was reportedly on the verge of developing its own, bespoke Xbox handheld—a project that was allegedly scrapped due to an extraordinary demand from its chip partner, AMD.
This insider peek into a secret chapter of Xbox history comes from industry leaker KeplerL2, a source with a respected track record in hardware manufacturing circles. The story they tell is one of ambitious plans, high-stakes negotiations, and ultimately, a risk too great for even Microsoft to take.
The Dream of a Native Xbox Handheld
According to the leak, Microsoft wasn't always planning to outsource its handheld ambitions. In the early planning stages, the company was seriously invested in creating an in-house, dedicated Xbox handheld. This device would have been a direct competitor in the burgeoning PC-handheld space, designed from the ground up to integrate seamlessly with the Xbox ecosystem.
The key to this project was a custom System-on-Chip (SoC) developed in partnership with AMD. A custom chip would have allowed Microsoft to optimize performance, battery life, and features specifically for its vision, much like it does with the chips inside the Xbox Series X|S consoles.
However, this crucial partnership allegedly hit a massive roadblock. During negotiations, AMD reportedly insisted that Microsoft commit to purchasing at least 10 million units of the custom SoC to justify the extensive research and development costs.
A Risk Too Far: The 10 Million Unit Stumbling Block
For Microsoft, this number appears to have been a bridge too far. As KeplerL2 explained in a detailed post on NeoGAF, the sales figures for existing handhelds made such a commitment seem incredibly risky.
“As far as I know, the handheld was canceled because AMD wanted a commitment of 10M+ units to justify making a dedicated SoC,” the leaker wrote, “but with Steam Deck selling 5 million units and ASUS ROG/Lenovo Legion only selling 1–2 Million, Microsoft didn’t want to take the risk.”
The math is sobering. The Valve Steam Deck, considered the market leader in the PC handheld space, has sold an estimated 5 million units since its launch. The combined efforts of Asus and Lenovo in the same category only amount to a fraction of that. Committing to double the lifetime sales of the Steam Deck for an unproven first-generation device was a gamble Microsoft’s leadership seemingly wasn't willing to take.
You can read the full context of the leak in the NeoGAF thread here.
Pushing Back on the Rumor
As with any major leak, this one hasn't gone unchallenged. Jez Corden, the well-connected Windows Central editor and Xbox reporter, publicly dismissed the claim on X (formerly Twitter). In a direct response to the circulating rumor, Corden stated simply, “this isn’t even slightly true, btw.”
His skepticism carries weight and aligns with Microsoft's recent public statements. Both Xbox President Sarah Bond and AMD CEO Lisa Su have confirmed their ongoing collaboration for future gaming hardware. Bond has explicitly stated that Microsoft is "actively investing in our future first-party consoles and devices," which seems to leave the door open for all kinds of hardware, including a potential handheld.
You can see Jez Corden's rebuttal for yourself here.
The New Strategy: Partnership Over Proprietary
With the in-house handheld project reportedly shelved, Microsoft pivoted to a strategy of partnership. This led to the collaboration with Asus, resulting in the ROG Xbox Ally and the Ally X.
Rather than a ground-up redesign, these devices are optimized iterations of the popular ROG Ally, rebranded and fine-tuned for the Xbox and Game Pass experience. The specs are impressive for a handheld, featuring an upgraded AMD Ryzen Z1 Extreme processor, 24GB of LPDDR5X RAM, a 7-inch 120Hz 1080p display, and a 1TB SSD.
Set for release on October 16, 2025, the devices are already generating significant hype, with some lucky users reportedly getting their pre-orders early.
Ready to experience the next best thing to an official Xbox handheld? Pre-order the ROG Xbox Ally today to secure your unit. Click here to pre-order on Amazon.
What Does the Future Hold?
The conflicting reports leave us with a fascinating "what if" scenario. Was Microsoft truly scared off by AMD's demands, or is the company simply biding its time, working on a custom chip in the background for a more distant future?
For now, the ROG Xbox Ally represents Microsoft's official foray into the handheld market. It’s a safer, more calculated bet that leverages another company's proven hardware. But the persistent rumors and Microsoft's own promises of "forward-thinking" hardware ensure that the dream of a purebred Xbox handheld is far from dead. The question remains: is this partnership a long-term strategy, or merely a stopgap while the engineers in Redmond go back to the drawing board?
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