Nintendo forecasts earnings drop as it gears up for new Switch model

Nintendo forecasts substantial drops in hardware, software, and overall earnings for FY23 as it focuses on a new Switch model.

@DeekeTweak
Published Sun, May 22 2022 12:28 AM CDT

Nintendo's billion-dollar growth will be hindered by the ongoing supply chain crisis as forecasts show a second straight year of earnings declines.

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Nintendo expects earnings and sales drops in Fiscal Year 2023 due to semiconductor shortages and lower game sales, but Research & Development spending is at 102 billion yen (nearly $800 million), the highest R&D spending since 2002. This indicates that Nintendo is funding the development of the next-gen Switch model alongside new games.

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It's also likely that Nintendo is elongating production of its new Switch model to weather the earnings drop impact and preparing for a big upward spring when the system launches. The 4K-ready Switch could be delayed past its expected FY24 release timeline and push the Switch into a sixth year.

FY23's forecast is by no means a terrible outlook. Nintendo's forecasts are typically conservative and if met, FY23 will be the third-best year in Switch console history. The Switch will also become the #1 Nintendo system in software sales by FY23.

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However, Nintendo does expect the period to deliver the second consecutive year of post-pandemic earnings drops. FY21 set a new highwater mark and delivered record Switch lifecycle highs in net sales, operating profit, net profits, and hardware sales. FY22 saw declines on all numbers outside of software sales, which actually beat FY21 with 235 million units.

Fiscal Year 2023, which ends on March 2024, will see dives across all metrics.

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"The third point is that we must account for the balance in supply and demand of components such as semiconductors, as well as the situation regarding logistics," Nintendo President Shuntaro Furukawa told investors.

"The financial forecast for the current fiscal year anticipates a rise in manufacturing costs (due to an increase in the price of components such as semiconductors) and a substantial rise in the cost of shipping due to a supply-demand imbalance surrounding the transportation industry, affecting the transportation of hardware produced in preparation for the holiday season."

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Nintendo has yet to announce a new Switch, but we do know the current Switch OLED model has a new dock that supports native 4K 60FPS output. The Switch OLED, however, does not support native 4K gaming.

We also know that Nintendo has been investing R&D cash into deep learning since 2019, which is the same technology used in NVIDIA's DLSS. It's believed the new Switch will achieve 4K resolution upscaling thanks to DLSS.

Derek joined the TweakTown team in 2015 and has since reviewed and played 1000s of hours of new games. Derek is absorbed with the intersection of technology and gaming, and is always looking forward to new advancements. With over six years in games journalism under his belt, Derek aims to further engage the gaming sector while taking a peek under the tech that powers it. He hopes to one day explore the stars in No Man's Sky with the magic of VR.

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