Australia Markets open in 42 mins

Nintendo Plans to Boost Switch Output to Meet Resilient Demand

(Bloomberg) -- Nintendo Co. plans to increase production of its six-year-old Switch console in the coming fiscal year after shipping roughly 21 million Switch consoles in the year ending March, according to people familiar with the matter.

Most Read from Bloomberg

The Kyoto-based company had lowered its sales forecast for the console to 19 million units in November because of component shortages, but is now convinced it can make more and demand remains strong, said the people, asking not to be named because the discussions aren’t public. The move to increase output is an unexpected measure at a late stage in the console’s lifecycle.

Nintendo has told suppliers and assembly partners it intends to churn out more Switch units in the fiscal year starting April, but has not yet communicated a precise target, the people said. It may revise down its plans later in the year if demand underwhelms.

Analyst expectations are for sales to diminish, however Nintendo’s plan suggests it sees sustained demand for at least another year. The console, whose price starts at $199.99, has been hampered more by supply issues than any demand slump, Nintendo executives have said.

“Sales in the recent holiday season were not that strong even with improved supply,” said Kenji Fukuyama, an analyst at UBS Securities. “People will soon start speculating about next-generation hardware and are likely to refrain from buying the old system. A slowdown in Switch sales momentum is unavoidable.”

A Nintendo spokesman declined to comment.

Switch console sales have historically been driven by the launch of marquee games, such as Animal Crossing: New Horizons during the pandemic, and Nintendo has several titles from blockbuster franchises like the Zelda series debuting in 2023.

Meeting Nintendo’s 19-million-unit sales target for this fiscal year and going above that in the next one would bring the Switch into the rarefied territory near 150 million lifetime sales — a mark surpassed only by Sony Group Corp.’s PlayStation 2 among home consoles to date.

Semiconductor and component shortages have diminished across the electronics industry in recent months, with Sony executives expressing confidence that its PlayStation 5 console will be much more widely available in 2023 than previously.

Nintendo can grow its Switch sales in the coming year, especially if it gives them a boost with game-themed special editions of the console, said Hideki Yasuda, an analyst at Toyo Securities. The company last year released a Splatoon 3 edition of its priciest Switch OLED model, decorating the hardware with illustrations from the popular third-person shooter and helping drive sales.

The company plans to release The Legend of Zelda: Tears of the Kingdom — the highly-anticipated sequel to Breath of the Wild, a game that was synonymous with the Switch in its early days — in May. A Zelda-themed Switch would entice existing console owners to buy another unit, Yasuda said.

--With assistance from Yuki Furukawa.

Most Read from Bloomberg Businessweek

©2023 Bloomberg L.P.