Nintendo Co cut its Switch sales outlook for the second quarter in a row as console makers grapple with a chronic chip shortage that is likely to continue this year.
The Kyoto-based company now expects to sell 23 million Switch units in the fiscal year ending March, down from the previous 24 million. It sold 18.95 million consoles over the past nine months, a 21 percent drop from the same period a year earlier, and said challenges around semiconductors and shipping may persist.
Operating profit for the quarter ended December was ￥252.6 billion (US$2.2 billion), above the average analyst estimate of ￥212.6 billion. Strong software sales during the holiday period and a fast-selling entry in the Pokemon franchise prompted Nintendo president Shuntaro Furukawa to raise the operating profit outlook for the fiscal year ending March to ￥560 billion from the previous ￥520 billion.
Photo: AFP
Console makers have been struggling at the back of the line for semiconductors since the start of the pandemic, with compatriot Sony Group Corp cutting more than 3 million from its PlayStation 5 sales forecast when it reported earnings a day ahead of Nintendo. PS5 shipping costs have grown so high that the company is expecting higher profit because of the reduced number of sales this year, chief financial officer Hiroki Totoki said when discussing its financial results on Wednesday.
The US$350 OLED model of Nintendo’s handheld-hybrid Switch, released in October last year, has also been hard to find at stores, suggesting the company could have sold more units if it were able to get them out to retail shelves. Component makers and logistics providers say they do not yet see signs of the jam coming to an end this year.
“Switch is just in the middle of its lifecycle and the momentum going into this year is good,” Furukawa said on a call after the earnings report.
“The Switch is ready to break a pattern of our past consoles that saw momentum weakening in their sixth year on the market and grow further,” Furukawa added.
The Switch became the fastest home console to surpass 100 million lifetime sales during the quarter, and analysts like Tokyo-based consultant Serkan Toto now consider it a lifestyle product as much as a piece of electronics. Initially released in March 2017, the device is likely to maintain its lead this year as Microsoft Corp’s latest Xbox generation is expected to remain supply-constrained much like Sony’s PS5.
Nintendo may face pressure from investors to join the acquisition campaign triggered by Microsoft’s planned US$69 billion takeover of Activision Blizzard Inc, which was swiftly followed by Sony’s announcement that it intends to buy Bungie Inc for US$3.6 billion. However, longtime watchers of the games maker like Toto do not expect it to look for its next big hit from an external game publisher.
“I really have a hard time imagining which of the big ones they could even be interested in buying,” he said. “Nintendo will always stay Nintendo. The company has always relied on first-party games, and I don’t see any reason why they should change.”
Nintendo chief Furukawa said in November that the company plans to spend up to ￥100 billion to strengthen its game development arsenal, with a focus on promoting organic growth. Yesterday, he reiterated that Nintendo plans no change in its investment policy, though he also said that the company is not against acquisitions if those are necessary.
“Our brand was built upon products crafted with dedication by our employees, and having a large number of people who don’t posses Nintendo DNA in our group would not be a plus to the company,” Furukawa said.
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