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Nintendo President: Component Shortage for Switch Will Have Impact on the Company’s Profit Margin

World wide shortages of semiconductors and sorts have caused delays on all the shipments and manufacturing of gaming consoles. Also Nintendo could not escape this crisis and it becomes clear that this will have an impact on the company.

With the release of the company’s financial statement Nintendo president Shuntaro Furukawa said that the current situation will have its impact on the company’s gross profit. Mainly because of increased costs.

Furukara commented on this situation in the Q&A of the financial release:

“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”

Altough it is not suprising that the current sitiuation has affected the company, it is interesting that they brought up how the Switch OLED has a lower profit margin compared to the standard Switch and Switch Lite.

Furukara continued “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.”

Read more: Nintendo Switch Outsold Life-time PS1 Sales

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