Nintendo Co is raising its target for Switch production to about 25 million units this fiscal year, people familiar with the matter said, as the ongoing COVID-19 pandemic keeps lifting demand and component shortages ease.
The Kyoto, Japan-based company, which in April hiked orders to 22 million units by March next year, is asking partners to tack on another few million units, said the people, who did not want to be identified discussing internal goals.
Assembly partners plan to work at maximum capacity through December.
The new production target suggests that Nintendo is likely to outperform its Switch sales forecast of 19 million units for the current fiscal year, which analysts have either deemed conservative or blamed on possible COVID-19 supply shocks.
Plans could still change by adjusting output in the January-March quarter if demand begins to taper in the coming months, but production partners expect to at least surpass the 22 million units that they had previously been instructed to assemble, the people said.
A Nintendo spokesman declined to comment.
The company has been boosting Switch production since the start of this year, even before hit game Animal Crossing: New Horizons became the breakout success of the novel coronavirus era.
Its assembly partners, who also serve major smartphone makers, initially prioritized requests from more lucrative handset contracts, but find themselves with more capacity as orders level off due to the economic downturn, as well as the roiling US-China conflict.
The Switch remains hard to find in major markets, including the US and Japan, and Nintendo president Shuntaro Furukawa told shareholders in June that output should soon normalize.
Nintendo’s profit blew past all estimates after hit game Animal Crossing surged ahead during the pandemic, fueling global Switch sales.
The Japanese company reported a fivefold leap in operating profit to ￥145 billion (US$1.4 billion) in the quarter ended in June, smashing analysts’ average expectation of ￥63 billion.
That performance was driven by island life simulator Animal Crossing: New Horizons, which got off to a hot start in March with nearly 12 million copies sold in its first 11 days. The game sold another 10.6 million units in the latest quarter — about half of them via digital download — and is close to becoming the best-selling Switch title of all time.
Nintendo said that more than half of new Switch owners over the last three months played Animal Crossing first.
Nintendo said that while there is still a lag time in restocking store shelves, its production bottleneck for the Switch would soon be resolved.
Although Nintendo suffered some supply and shipping issues from the coronavirus outbreak, the company has mostly experienced a strong tailwind that has affected the entire games industry, as people spend more time at home to avoid spreading infection.
This trend is likely to last throughout the year, said Hideki Yasuda of Ace Research Institute, who anticipates accelerating sales of both hardware and software for Nintendo — especially the lucrative digital downloads — as the calendar moves toward the Christmas and New Year holiday shopping season.
On Wednesday, the company announced Pikmin 3 Deluxe for release at the end of October, partially addressing concern about its ability to sustain momentum through the holiday shopping period that is likely to be dominated by next-generation consoles and a slate of new titles from Microsoft Corp and Sony Corp.
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