Nintendo may delay its next-gen Switch Pro or Switch 4K due to the ongoing chip shortage.
Now is not a good time to release games hardware. 2023 may not be much better, either. Nintendo, Sony, Microsoft, and a multitude of hardware makers are facing a worldwide chip shortage. Supply lines are constrained and production costs have risen as a result, and hardware is more expensive to make. This typically leads to two things: lower production volume and lower profits.
Meanwhile the gaming market is booming. The pandemic has kicked off a new level of hardware and software spending, and consumer hardware demand has been voracious throughout the shortage. It's not an issue of gamers wanting to buy hardware. It's an issue of companies being able to produce hardware, ship it, and then make enough of a profit on the hardware to make it necessarily worth it--or at least maintain according values.
Nintendo's hardware business has been quite profitable over the Switch's lifespan.
Microsoft, for example, sells Xbox consoles at a loss. Nintendo is different; the Switch was sold at a profit since release.
Now those profit margins are lowering. Nintendo CEO Shuntaro Furukawa recently told investors that the Switch production costs have increased.
"The recent component shortages are leading to increased costs. And even though the rise is gradual, it has been impacting our gross profit,"
"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."
Due to the current market production conditions and the massive success of the current Switch family of hardware and accessories, it's possible Nintendo could opt to delay the Switch Pro and ride software earnings for another year or more. The case for this strategy is made more compelling now that the Switch has sold over 100 million units worldwide.
In that same report, Nintendo CEO said strong software adoption will help keep the Switch afloat into its sixth year:
"The fact that so many consumers are playing Nintendo Switch creates a greater opportunity for people to pick up new titles when they are released in the future. With Nintendo Switch's user engagement rising to record levels toward the end of last year, we believe the platform is heading into its sixth year with strong momentum."
Even still, evidence of a new Switch has been mounting for a while.
Back in 2021, it was reported that next-gen Switch devkits had been shipped out to developers.
The Switch OLED also lays the foundations for a new 4K-ready Switch. The OLED model's dock has a special converter chip capable of outputting native 4K video signals, however the Switch OLED's built-in processor isn't powerful enough for 4K gaming.
The dock is believed to be used with the new Switch Pro, which should feature an upgraded Tegra chip possibly on the new Orin family of SoCs.
It'll be interesting to see what Nintendo chooses to do, and while it could weather a console production hit, the games-maker still makes over 45% of its quarterly revenues from hardware sales...so hardware is definitely and important earner.
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