Chips are down for gaming console maker
Japan’s Nintendo has forecast that annual Switch console sales will fall 11.5% in what would be the first decline for the five-year-old device after a pandemic-induced boom in home gaming.
The Kyoto-based firm expects to sell 25.5 million units in the business year that started on April 1. That would compare with 28.8 million a year earlier after booking an 82% rise in operating profit at $5.9bn (about R83bn).
Announcing the figures, Nintendo president Shuntaro Furukawa said a shortage of chips, which has affected electronics makers worldwide, was affecting production and adding to uncertainty.
Last week the share price of rival Sony Group Corp fell after the firm said the chip shortage would likely prevent it from drastically boosting console production.
A huge beneficiary of governments’ stay-home antivirus policies, market participants are now focused on whether the Switch can maintain momentum in its fifth year of life amid speculation over new games and a hardware refresh.
Nintendo is known for conservative forecasts that force the firm to make incremental revisions. Last May, in the midst of booming gaming sales globally, Nintendo said Switch hardware and software sales would undershoot the previous year.
The firm went on to sell 230 million units of software in the year ended March 31, 20% above that forecast. For the current year, Nintendo pegged software sales at 190 million units, with Furukawa saying he hoped to exceed targets.
“Hardware and software are still selling well — it’s a different situation from previous consoles in their fifth year,” he said.
Nintendo’s share price has gained 90% since March 2020 as gamers flock to titles such as “Animal Crossing” and “Ring Fit Adventure”. Still, the stock has fallen 10% from highs reached in February as investors take heed of the Switch’s cyclical peak.
Nintendo is “lowballing” with its forecasts, said Serkan Toto, founder of game industry consultancy Kantan Games, who expects Switch hardware sales of 25 to 30 million units and software sales of 250 million units.
Each generation of gaming console typically lasts about seven years before being superseded by the next, with peak sales usually around the year five mark. The home-portable Switch console’s hybrid nature will extend its life cycle, Furukawa said.
In contrast to a thin games pipeline this time last year, support for Switch sales will come from upcoming titles, including “Mario Golf: Super Rush” set for release in June and a remake of “The Legend of Zelda: Skyward Sword” due in July.
Nintendo is highly dependent on its console business, unlike rivals such as Sony Group Corp and Microsoft Corp, which have diversified business lines.
Its expansion into the booming mobile gaming market has largely stalled.