Nintendo says component shortages involving Switch are starting to impact gross profit
It’s no secret that there have been component shortages for all kinds of tech, including Switch. Nintendo President Shuntaro Furukawa has now said the situation is beginning to impact the company’s gross profit due to rising costs.
During Nintendo’s financial results briefing last week, Furukara explained that “the rise is gradual” and that there will be only a small impact on this financial year. However, “if costs also continue at current levels in the next fiscal year, we expect material profitability to decline accordingly compared to this fiscal year.” It is also mentioned that the Switch OLED has a lower profit margin than the standard Switch and Switch Lite.
“The Nintendo Switch was launched several years ago, and we have continued to work to reduce costs, but recent component shortages are driving up costs. And while the rise is gradual, it has had an impact on our gross profit. On a full year basis, we expect this impact to be minor in this fiscal year, but if costs also remain at current levels in the next fiscal year, we expect profitability hardware decreases accordingly compared to this fiscal year. Also, as already mentioned, Nintendo Switch – OLED model has a lower profit margin than Nintendo Switch and Nintendo Switch Lite. Unless the situation changes drastically, we do not expect any improvement in profitability over the next fiscal year and beyond.That said, these cost increases do not affect our production plans and we will continue to produce the volu me necessary to meet the demand.
Furukawa also commented on the situation regarding Switch production:
“In terms of Nintendo Switch hardware production and sales, we were able to produce enough hardware to meet demand in the first half (April-September), and stores had inventory around the world. But in the months after October, which includes the holiday season when sales are at their highest, the situation has varied by region. In Japan and Europe, there were temporary shortages of Nintendo Switch – OLED model, but in general, for the whole Nintendo Switch family, we were able to produce and supply enough hardware to meet the demand. In contrast, in the United States, shortages continued from the third week of November (Thanksgiving).
In December, we were not able to meet all the demand, and this situation continued until the beginning of the year. Since the beginning of this financial year, we say that the outlook is uncertain due to shortages of semiconductors and other components. We haven’t seen any signs of a major change since we entered 2022, so the situation remains the same. If we were able to sell equipment during the holiday season at the same level as the previous year under these circumstances, it is in large part due to the support of our partner companies, and I would like to express my deep gratitude to them for this. In the future, we will strive to manufacture as many materials as possible to meet demand. »