Well this should be interesting. Nintendo has recently announced they will be ramping up the production of their Nintendo Switch consoles. The goal is to make nearly 20 million units of the Switch device in the year ending March 2018. However, they are facing some competition for some of the parts that go into their new killer app. It would seem that some of the key components are part of an industry wide shortage. The parts in question include NAND flash-memory chips for data storage, liquid-crystal displays, and motors that are integral to the Switch’s “HD Rumble” feature, are all in-demand from Nintendo, Apple, and various other device firms in China.
Challenges for Nintendo
If it comes down to a bidding war, Nintendo simply might not be able to compete Apple. The explosion of web-based services for companies has created an increase in demand for flash memory. While the sales for the Nintendo Switch have been strong, that doesn’t mean they are out of the woods yet. After the super popular NES classic wasn’t able to meet demand, they could be a facing similar fate. Christmas is a premium time for video games and console sales. Without enough in stock, they could be leaving a lot of money on the table. And retailers have already warned that there could be more shortages.
But some believe that it isn’t just Apple in the way of getting the necessary parts. Nintendo isn’t keen to pay the premium prices either. The low price of the Switch at $299.99 doesn’t leave much room for profits. The cost of production for the Switch is reportedly around $257. However, low-profit margins are par for the course for console makers. That doesn’t change the fact that such tight margins make a shortage troublesome. Because as demand goes up and supply goes down, the prices will go up in response. (See Dr. McCrickard? I did pay attention in Macroeconomics.)
Nintendo has a serious challenge coming into the summer and fall season. Will they be able to get he parts needed to make the Nintendo Switch? Or will they try and shake up the way the Switch is made and hope for the best?