Designing arcade machines for limited spaces presents several unique challenges that require careful consideration. One major issue is optimizing the cabinet size without compromising gameplay experience. Designers must balance screen size, control panel placement, and overall footprint to fit tight spaces while ensuring player comfort.

Another challenge is selecting and arranging hardware components efficiently. Compact designs demand smaller yet powerful systems, which can lead to heat dissipation issues and maintenance difficulties. Additionally, the ergonomics of the control panel become critical in confined setups, as players need adequate space for movement without feeling cramped.

Sound system integration also poses difficulties, as smaller cabinets may limit speaker placement and audio quality. Lastly, durability becomes a concern since space-constrained machines often experience higher wear and tear due to frequent user interactions in tight quarters. Overcoming these challenges requires innovative engineering and a deep understanding of both gaming mechanics and spatial constraints.