Nintendo Switch sales are showing no signs of slowing down. The console sold 2.74 million units during the first month of launch. Piers Harding-Rolls of IHS Markit recently said that the biggest risk before Nintendo was not being able to meet the soaring demand for Switch. Nintendo has realized that the current production rate is not enough to get consoles in the hands of all the people willing to buy it.
Nintendo Switch production ramped up to prevent ‘customer tantrums’
Whenever the Switch becomes available at a store, it runs out of stock within hours. Demand is only expected to rise during the crucial holiday shopping season. Citing sources close to the company, Financial Times reports that the Japanese company has asked its suppliers to ramp up production. Nintendo is looking to ship at least 18 million units during the fiscal year ending March 2018.
Nintendo’s initial production target for the current fiscal year was only 10 million units. The company is officially sticking to that target despite ramping up production, just to keep the expectations low. It may still face component supply issues or a decline in demand. Analysts believe that Nintendo could sell as many Switch units as it could make. But factors like component availability might be beyond its control.
Sources told the Financial Times that the company is increasing production to prevent “customer tantrums.” Nintendo is set to release the Super Mario Odyssey this holiday season, when the Switch sales are expected to peak. The company needs to ensure that there are enough systems to play before the Super Mario Odyssey comes out.
Shortages during the holiday period could hurt Nintendo’s attempt to recover from the failure of its previous generation consoles. Back in March, the Wall Street Journal had reported that the company was increasing its production target to 16 million units for the fiscal year March 2018. The latest report from the Financial Times indicates that Nintendo is expecting much stronger demand for the console.
Before the launch of Nintendo Switch, analysts were expecting sales of only five million units due to the console’s high price tag. But Nintendo Switch and its launch title Legend of Zelda: Breath of the Wild have received overwhelmingly positive reviews all over. In fact, the Breath of the Wild has sold more copies than the Nintendo Switch itself during the launch month.
Nintendo vs. smartphone vendors
The increased Nintendo Switch production has led to a tussle between Nintendo and Apple for components. Sources told the Wall Street Journal that Nintendo was looking to make “nearly 20 million units” of the console by March 2018 and it needs more of components such as the NAND flash memory, LCD panels, and motors that control the console’s HD rumble. Some of these components are also used by smartphone vendors.
Toshiba told the WSJ that demand for its NAND flash memory had been “overwhelmingly greater than supply” and it is expected to remain so for the rest of this year. Smartphone makers have an edge over Nintendo in getting the components because they place much larger orders and can offer better terms than Nintendo. The Japanese company sells Switch at razor thin margins, so it can’t afford to pay suppliers a premium.
The success of Nintendo Switch has pushed Nintendo’s shares to a record high. The stock closed Monday at 34,010 yen, the highest level since December 20008. Nintendo shares have rallied nearly 40% year to date. The stock is even higher than it was in July last year, when the success of Pokemon Go had more than doubled Nintendo’s share price within a matter of days. The stock fell after the company issued a clarification that it was not going to make a fortune out of Pokemon Go.
Monster Hunter XX coming to Nintendo Switch
Nintendo has an impressive lineup of gaming titles to keep players hooked to the console. The Breath of the Wild has already proved to be a blockbuster, with some experts calling it the “best launch title for 20 years.” Other titles coming to Nintendo Switch are Splatoon 2, Super Mario Odyssey, and ARMS. Capcom has also confirmed that its Monster Hunter XX is coming to the Switch.
Capcom is the developer behind the Resident Evil and Street Fighter franchises. Monster Hunter XX was also released for Nintendo 3DS in 2011, and had received a positive response. Some Wall Street analysts had expressed concerns that Nintendo might struggle to attract third-party titles for the Switch. Now that A-list developers such as Electronic Arts have already come on board, those fears have alleviated.
The announcement of Monster Hunter XX has given users and investors hope that more third-party developers could bring titles to the Switch.