Though it's not a particularly glamorous topic and isn't talked about as much as it should be, there is currently a manufacturing crisis engulfing aspects of the technology industry, including video games. The woes of Sony and Microsoft in trying to produce enough new consoles to meet demand have been widely reported, yet even with established products like the Switch the issues are starting to bite.
The basic summary is that semiconductors of various kinds aren't available in enough volume, as there is currently a fundamental shortage of manufacturing supplies. Nintendo, perhaps due to its established processes and technology in the Switch, was able to ride this out to achieve outstanding hardware sales over the past year as stock of PlayStation 5 and Xbox Series X/S were slow to roll out. However, the ongoing issues were cited in Nintendo's most recent financial results, with the company stating that its sales estimates were based on successfully acquiring all of the materials it needs for production.
However, company President Shuntaro Furukawa addressed this in more detail in the investor Q & A, which has now been officially translated. Below is what he said:
As for production, we achieved steady hardware production through the end of last calendar year, and as a result, in the previous fiscal year we set a record for our highest fourth-quarter sales volume. Meanwhile, demand for hardware continues to exceed our expectations even after the beginning of this calendar year, and production has currently not caught up to this high demand due to the tight supply and demand situation for semiconductor materials worldwide. Although we are currently striving to produce as many units as possible, the fact is that our production plans are more uncertain than they were at the beginning of previous fiscal years. Our full-year sales plan is based on the premise that we can secure the materials necessary for production, but if we are able to produce more units, we will work hard to meet the strong demand, and to be able to ship and sell those units.
It's rather telling that Furukawa has outright confirmed that, at this moment, production has not caught up to current high demand. Another factor that harmed supplies and stock, particularly in Europe, was the recent blockage of the Suez Canal shipping route, which added strain to already tight margins. There is also, of course, the impact of the global pandemic.
Regarding the current situation for Nintendo Switch hardware, there are no major differences between regions, and demand remains strong overall. However, COVID-19 has caused declines and delays in freight traffic in markets outside of Japan, and retailers in some regions are experiencing temporary shortages. In particular, the accident that blocked the Suez Canal caused delays in the transportation of products bound for Europe, and retail inventories are tight in some countries. In the United States, sales were strong in March, and the supply of hardware is currently not keeping up with the strong demand.
What this all means is that it seems likely, to varying degrees depending on territory, that there could be some shortages of Switch hardware stock. This did happen at times last year as well, so it's not unprecedented, and no doubt Nintendo will do everything in its power to meet demand.
The fact demand remains so high is a positive sign, of course; the Nintendo Switch is still going strong after over four years on the market.
[source nintendo.co.jp]
Comments 34
Nintendo is going to keep getting money out of this, and once it dims down (Like a lot), we might get are next switch console.
Year 5 and struggling to meet demand.
Craziness!
I don't understand that. We have plenty of Switches available in Norway.
@GrailUK I mean, its at least better the having to (Maybe) wait a whole year for the PS5 shortage.
Tegra X1 is a 6 year old chip. I don't get why there's no price reduction after all this time. Production is much cheaper now. Its not like its a cutting edge chip like Series X or PS5
@GrailUK Its not the reason you think it is. There is a world wide shortage of silicone chips. Thats likely the major issue, PS5, Monitors and GPUs are all being hit super hard
Reports like these make me a bit pessimistic about the availability of the "Switch Pro" whenever it launches. It will probably go the way the PS5 and Xbox Series X launches. Not enough supply and scalpers snagging up every unit the second they are being listed online.
I think production struggles will leave its mark on 2021. I’m talking in all aspects of life!
not sure but I think he is talking about shortages in Japan. But maybe he means other regions too.
@dimi They are already struggling to meet demand. Why would they drop the price?
@dimi They're struggling to produce enough units to meet demand at the current price point, they'd just be throwing away money if they reduced it.
@dimi Why would you reduce the price of something when people are buying more than ever at current price. Nintendo aren't a charity so are in the business of making as much as possible. Decreasing the price may lead to increased demand which they can't keep up with while not making any more money.
@Vriess I think this issue is delaying a possible "Switch Pro" announcement. No point spreading themselves thin across different models when the current one is flying of the shelf. A small revision seems more likely at this point keeping the same price point.
At least you’ll be able to get one after a while unlike the other gen 9 consoles
@dimi these chips get produced from the same foundry, in this case TSMC. It doesn't matter the age of the chip, the materials really come from the same place and those are what's creating this dwindling supply due to the incredibly high demand.
All I can say, if the Switch Pro (or whatever they'll call it) is released, preorder it on day one. You may not get one for quite a while.
In addition to the Switch selling super well, there's also the whole ordeal with the chip shortages that have been greatly affecting the tech industry. This is why GPU's, PS5's, and the new XBOX's are so difficult to find and still selling for crazy prices online. Even car companies are low on supply due to the chip shortages... it's pretty crazy. The family car I've been driving finally crapped out and I've been trying to get a decent deal on a vehicle that isn't too old and has low mileage... the search has shown slim pickings and a lot of mediocre deals.
That being said, I still see Switch's available online most of the time. The last three times I went on Best Buy's website they were available to order, including the Animal Crossing unit. There are times they sell out but it seems the majority of the time they are available.
Also, just as a laugh, my one friend keeps complaining that he wants a Switch but still thinks the system is too overpriced. He was asking me why the system isn't like $150 already... that was a fun discussion about units sold, profit margins, and supply and demand haha.
@dimi supply and demand is the reason for no price drop. Furukawa just noted they're selling every console they make, so why lower the price? If anything they should be raising the price.
Demand for this console is so high they won’t need to reduce the price. But interestingly the components are going to be costing more due to shortages which intern reduced the profit per console similar to a price reduction would.
I see them at every retail store I enter.
The Switch is now an icon. That rounded rectangle with the blue and red joy-cons on the side is what pops into the average non-gamers head when they (or their offspring) want to get a game console. It's kinda like Nokia phones were before the iPhone came out.
I can see demand for Switch staying high until 2023 at least.
This is exactly why I think a Switch "Pro" will not happen this year. Plus the shortages for the chips that would go in that pro model.
Is this really news to any extent? The Switch was bound to hit shortages due to the semiconductor shortage. This is not at all surprising.
For now...good problem to have. I am concerned about the semiconductor shortage but all companies can do is ride this out. As long as they keep trying to meet demand that’s all they can do.
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This is the reason the switch pro isn’t actually a reality. This right here disproves every other rumor that “proves” the console’s existence.
@NorseGamerTommy,
Perhaps your town or city in Norway is not the whole world.
The issue obtaining chips is affecting my work and I work for a BMW manufacturer. I've been working 3 day weeks for the last few and at least next week too. I'm getting paid for being off though so no complaints from me.... yet. The complaints will come soon though, when we're expected to work extra hours and weekends to catch up with orders.
Marketing ploy. There are plenty of Switches in the UK.
And if there really is a shortage then that puts the value of my Switch up. So any reasonable offers for a 3 year old Docked Switch above £500 will be considered.
@johnvboy I dont understand. i didnt say anything about dropping the price in my comment. Did i miss something in the story?
"I saw Switches in my local store, so that means this is just a marketing ploy!" Because the entire world is your town. :/
It's just as useful as me saying that I didn't see Switches in my local store. One store, or even a couple stores all in one area, do not make for a viable sample size.
And the superconductor shortage is a very real issue affecting a lot of products right now.
@earthinheritor,
Sorry, meant to reply to the comment above yours.
@dimi,
So drop the price of the Switch, even though it's selling out at full price, yes great idea, don't apply for a job as a financial advisor anytime soon.
@dimi consumers determine price of a product. If everyone is buying it at current price no reason to lower the price. And there is a low price option. The Lite.
@johnvboy can you name another gaming console without a price drop after 4 years? Anyway the big money is not on hardware sales but on games and services. Microsoft and Sony use a different approach losing money in hardware (at least in start).
@dimi,
So Nintendo do not want to lose money on hardware, it's not a crime, Apple products never drop in price either, if the market supports it why panic sell, and I doubt Nintendo would have sold many more units if the had dropped the price.
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