Sega CD
Released in 1988, the Genesis (known as the Mega Drive in Europe and Japan) was Sega's entry into the fourth generation of video game consoles. In mid-1990, Sega CEO Hayao Nakayama hired Tom Kalinske as CEO of Sega of America. Kalinske developed a four-point plan for sales of the Genesis: cut the console's price, develop games for the American market with a new American team, continue aggressive advertising campaigns, and ship "Sonic the Hedgehog" with the Genesis as a pack-in game. The Japanese board of directors initially disapproved of the plan, but all four points were approved by Nakayama, who told Kalinske, "I hired you to make the decisions for Europe and the Americas, so go ahead and do it." Magazines praised "Sonic" as one of the greatest games yet made, and Sega's console finally took off as customers who had been waiting for the Super Nintendo Entertainment System (SNES) decided to purchase a Genesis instead.
Sega Genesis
With the release of the Sega Saturn slated for 1995, Sega began to develop a stop-gap solution that would bridge the gap between the Genesis and the Saturn, and would serve as a less expensive entry into the 32-bit era. At the Winter Consumer Electronics Show in January 1994, Sega of America research and development head Joe Miller took a phone call from Nakayama, in which Nakayama stressed the importance of coming up with a quick response to the Atari Jaguar. One potential idea for this came from a concept from Sega Enterprises, later known as "Project Jupiter," an entirely new independent console. Project Jupiter was initially slated to be a new version of the Genesis, with an upgraded color palette and a lower cost than the upcoming Saturn, as well as with some limited 3D capabilities thanks to integration of ideas from the development of the Sega Virtua Processor chip. Miller suggested an alternative strategy, citing concerns with releasing a new console with no previous design specifications within six to nine months. At the suggestion from Miller and his team, Sega designed the 32X as a peripheral for the existing Genesis, expanding its power with two 32-bit SuperH-2 processors. The SH-2 had been developed in 1993 as a joint venture between Sega and Japanese electronics company Hitachi. At the end of the Consumer Electronics show, with the basic design of the 32X in place, Sega Enterprises invited Sega of America to assist in development of the new add-on.