Valve doesn't have any current plans for Source Engine 2

Valve head Gabe Newell has said that instead of creating Source Engine 2, the firm believes it prudent to continually update the tech instead of starting on a new design.

Speaking in an extensive feature with Develop, Newell said there are "advantages on iterating on a mature and stable and shipped codebase, as opposed to starting over again."

“I think, when you see a game like DOTA 2, you’ll see how developers can get a lot more out of Source than most companies can get from a scratch-built engine," he offered. "I think that incremental updates model has worked really well for us. Does that mean we’ll reach some architectural tipping-point where we’ll need to change? No... so far we’ve been able to keep the engine moving ahead, robustly. I mean, I think it looks great.”

Newell also said the firm doesn't have plans to promote its Source Engine in the way other tech firms do, and instead subscribe to the mantra use it if you like, or don't.

“We’re really happy if another studio wants to use our engine, but we’re not going to go out there and try and muscle in on what Epic Games does,” Newell said. “A few people have used our engine, and I think a few more will find it useful now that we have a PS3 edition.

“Y’know, we’re happy if people want to use our tools. We’re also super happy if people want to use Unreal Engine. We’ve worked hard with the guys at Epic Games to integrate Steamworks into Unreal Engine, which we think will be a great solution.

“Our philosophy is always about creating the best value for our customers, but also our partners, and right now I think there’s more value for us to pursue things like the microtransaction part of Steamworks.

"I think if we’d take the microtransaction model away, and instead push harder on getting studios to sign up to Source, I think we wouldn’t be using our time nearly as efficiently.”

You can read the excellent Develop feature The Valve manifesto here.