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Nintendo Dips After New Switch Disappoints in Japan Debut

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(Bloomberg) -- Nintendo Co.’s pricier new Switch console sold less than half its predecessor managed during its opening weekend in Japan, suggesting supply constraints were hampering the company’s biggest product launch in years.

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The hybrid handheld’s OLED edition, released globally on Friday for $350, sold 138,409 units in the domestic market over its launch weekend, sales tracker Famitsu said Thursday. That compares with the original Switch’s inaugural weekend sales of 330,637 in 2017 and the Switch Lite’s 177,936 units in 2019. It was a surprising result after a fast uptake of pre-orders ahead of the launch.

Nintendo shares fell as much as 1.5% in Tokyo on Friday, extending a decline of more than 20% this year while rival console makers such as Sony Group Corp. have gained.

The new model sports a more vibrant 7-inch OLED display along with a new flexible stand, more storage space and better speakers as well as an internet cable port. Even without a widely expected graphics chip upgrade on the inside, the Switch OLED was a trending topic on social media in major markets like Japan and the U.S., where early impressions have been overwhelmingly positive.

Nintendo’s own flagship store in the trendy Shibuya district of Tokyo has been among the major retailers implementing lottery draws to determine who gets to buy a Switch OLED device. That would typically suggest rabid demand for the new gadget, however the weak initial sales indicate there was inadequate supply.

The thin availability of the new handheld is set to extend at least until early next year, according to an official at a major Japanese retailer, who asked not to be named because they’re not authorized to speak publicly.

While Nintendo grapples with supply challenges, there’s also concern about the strength of long-term demand for the OLED model.

“Switch hardware sales may have peaked in fiscal 2021 ended March, absent a reported but as yet unconfirmed Pro version, putting a greater onus on software to drive profit,” said Bloomberg Intelligence analyst Matthew Kanterman. “Some of the demand, especially that which was pulled forward during the height of the pandemic, is now starting to wane.”

Nintendo had split production capacity between the upgraded new Switch, the $300 original console and the $200 Lite in a way that indicated the company’s expectation that the OLED edition wouldn’t outsell the others by a large margin, according to an executive at an assembly partner. This conservative approach echoes investor concern at the time of the Switch OLED’s announcement that it didn’t represent a sufficiently impressive upgrade.

Famitsu’s figures show Switch and Switch Lite sales on a consistent downward trajectory this year. Unlike during the pandemic-afflicted 2020, the two consoles are available in ample supply almost everywhere today. Launched more than four years ago and having sold more than 89 million units to date, the Switch product family looks set to rely on its newest model to sustain momentum while the original version may require a price cut in order to clear unsold inventory, according to Ace Research Institute analyst Hideki Yasuda.

A Nintendo spokesman said the company has no plans to reduce Switch prices. It cut the standard model’s price in Europe last month largely in response to a change in currency exchange rates.

(Updates with share reaction in third paragraph. A previous version of the story corrected sales figure in seventh paragraph.)

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