Nintendo says component shortages involving Switch starting to impact its gross profit
It’s no secret that there have been component shortages for all sorts of technology, including Switch. Nintendo president Shuntaro Furukawa has now said that the situation is starting to impact the company’s gross profit due to increased costs.
During Nintendo’s financial results briefing last week, Furukara explained that the “rise is gradual” and there will only be a small impact this fiscal year. However, “if costs continue at current levels through next fiscal year as well, then we would expect hardware profitability to decrease correspondingly compared to this fiscal year.” Also brought up is how the Switch OLED has a lower profit margin compared to the standard Switch and Switch Lite.
Furukawa stated:
“Nintendo Switch was launched several years ago, and we have continued to work to reduce costs, but the recent component shortages are leading to increased costs. And even though the rise is gradual, it has been impacting our gross profit. Looking at the full year, we anticipate that impact to be minor this fiscal year, but if costs continue at current levels through next fiscal year as well, then we would expect hardware profitability to decrease correspondingly compared to this fiscal year. In addition, as has already been mentioned, Nintendo Switch – OLED Model has a lower profit margin than Nintendo Switch and Nintendo Switch Lite. Unless the situation changes dramatically, we do not foresee profitability improving next fiscal year and beyond. That said, these cost increases do not affect our production plans, and we will continue to produce the volume required to meet demand.”
Furukawa also commented on the situation regarding Switch production:
“Regarding the production and sales of Nintendo Switch hardware, we were able to produce enough hardware to meet demand through the first half (April-September), and stores had inventory throughout the world. But in the months following October, which includes the holiday season when sales are at their highest level, the situation varied in different regions. In Japan and Europe, there were temporary scarcities of Nintendo Switch – OLED Model, but in general, for the Nintendo Switch family overall, we were able to produce and supply enough hardware to meet demand. On the other hand, in the U.S., shortages continued from the third week of November (Thanksgiving) onward.
In December, we were not able to meet all of the demand, and that situation has continued through the beginning of the year. Since the start of this fiscal year, we have said that the outlook is uncertain due to the shortages of semiconductors and other components. We have not seen signs of any major changes since we entered 2022, so the situation remains the same. The fact that we were able to sell hardware during the holiday season at the same level as the previous year under these circumstances was thanks in large part to the support of our partner companies, and I would like to express my deep gratitude to them for this. Going forward, we will work to manufacture as much hardware as possible to satisfy demand.”
