The gaming pioneer faces rising memory costs, which threaten to impair margins for its Switch 2 console
[HONG KONG/TOKYO] Nintendo’s shares fell as much as 4.7 per cent on Wednesday (Dec 10) to their lowest level since May, weighed down by concerns that the surging price of components including memory chips will erode its profit.
The Kyoto-based gaming pioneer faces rapidly rising memory costs, which threaten to impair margins for its popular new Switch 2 console and potentially also curb market demand as accessory costs also rise.
The price that Nintendo has to pay for the 12 GB random access memory, or popularly known as RAM, modules in the Switch 2 jumped 41 per cent in the current quarter, said market intelligence firm TrendForce.
The Nand storage aboard the new console also became nearly 8 per cent pricier, with that cost bump also affecting add-on storage cards.
Nintendo’s shares have declined in seven out of eight trading days in December, losing roughly US$14 billion in market value, as optimism about the Switch 2 fades in the face of a growing memory supply crisis.
PC makers such as Dell Technologies and HP have warned that they may have to consider price hikes next year as component costs rise at an unprecedented rate.
“The rise in Nand prices is starting to really impact express SD (secure digital) card prices. A 256 GB express SD card costs US$89.99 on Amazon. This is effectively a cost that Nintendo has passed on to the gamer,” said Pelham Smithers of Pelham Smithers Associates.
He sees these additional storage cards as essential because of the limited storage built into the Switch 2, with third-party games from the likes of Electronic Arts effectively costing US$20 more because of the storage need.
Another cautionary note for Nintendo comes from the earlier-than-expected discounting of its new console.
The Switch 2 started out selling faster than any other games console in history. But there is uncertainty about whether it can sustain that popularity, particularly with gamers beyond its loyal fan base.
“One of the surprises around Black Friday was seeing the Nintendo Switch 2 plus Mario Kart World bundle being offered online at a US$50 discount – which essentially meant that you got the Mario Kart game for free,” Smithers said. “You wouldn’t expect it to be discounted this close to the holiday season.” BLOOMBERG
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