The exact quote:
It is important to us, and we’ve tried to be really clear, we are not doing the yearly cadence. We’re not going to do a bump every year. There’s no reason to do that. And, honestly, from our perspective, that’s kind of not really fair to your customers to come out with something so soon that’s only incrementally better. So we really do want to wait for a generational leap in compute without sacrificing battery life before we ship the real second generation of Steam Deck. But it is something that we’re excited about and we’re working on.
Presumably this will mean a high-performance ARM CPU (comparable to the Apple M series), along with the dynamic recompilation technology Steam have been experimenting with. (It’s unlikely that Intel or AMD will deliver the generational leap they’re talking about.)
This reminds me of an old thread on a random forum. Just when Sims 2 was released they were speculating what Sims 3 would look like.
Someone suggested that the next game will surely be in the source engine!
While your point is more realistic than that I still don’t think valve could pull this off in reasonable time. Translation for games is extremely hard to do right. I think if at all there will be another generation of decks before we see something like this.