Nintendo Faces Supply Issues Ahead of Holiday Season

Takashi Mochizuki and Sarah E. Needleman report via The Wall Street Journal (Warning: source may be paywalled; alternative source): Nintendo's latest videogame machine, the Nintendo Switch, is winning fans for both its lineup of popular games and its flexibility -- it works as both a living-room console and a hand-held device. But the real challenge for gamers has been actually getting their hands on it. Production isn't keeping up with demand in Japan, resulting in blockbuster queues and lotteries there. Over weekends in July and early August, tens of thousands of fans lined up at stores for a one-in-10 chance to buy the $300 console at events that have become a form of entertainment. Nintendo's official target is to ship 10 million Switch units in its current fiscal year ending in March 2018. People involved in the supply chain say they have been told to prepare for 18 million units. One executive in the supply chain said his company was ready to pick up the pace of production if asked. One delicate balance for Nintendo: The more it tries to boost output quickly, the more it has to bow to the terms of parts makers, some of whom are also busy with orders for Apple Inc.'s next iPhone. "We're doing everything we can to make sure everyone who wants to buy a Nintendo Switch system can do so," Nintendo said in a statement. "We will ramp up production for the holiday period, which has been factored into our forecast."

Comments

Who cares about the Switch, make more SNES

[HalAtWork]

The SNES Classic is the item that won't be around next year, they need to make more of those. Nobody can get one, preorder availability was pathetic. Switch has a couple of games I want to play, SNES Classic has at least 10. Just make more of those.

Yes I have a SNES but not all of these games, but I want Star Fox 2, new official controllers, and a HDMI out.

Re: Who cares about the Switch, make more SNES

[courteaudotbiz]

Nintendo is, for some reason, seriously just *trying* to piss people off as best as I can tell.

I personaly think they're doing a tremendous job at pissing ME off. Living in Quebec, just because they won't translate TFM in French, the SNES will not be available for sale at all here.

I've been trying to put my hands on the NES Classic since it (didnt) hit the shelves, but to no avail.

The only people making hard cash on these short supplies are the resellers, cause they pay 100$ for the console and resell it for 300$. Suckerz.

Re: Who cares about the Switch, make more SNES

[DontBeAMoran]

You can also blame the fucking Office de la langue française. It's these fuckers' fault we can't get stuff here because of archaic laws. This is 2017, you either read english or you're stuck with 1% of the Internet.

Re: Who cares about the Switch, make more SNES

[KGIII]

Yes, but you have ketchup chips. That makes up for everything.

Do people care?

[ufpdom]

I was in Bestbuy the other day and saw 12 in a case and 9 in Target. I'm seeing them on shelves now so can't say its a supply issue unless people don't want it.. Just my 2 cents.

Re:Do people care?

[youngone]

My local supplier has discounted them heavily. I don't think they're selling very well here, but then they are expensive for what they are, so that might be the problem.

No way it's not intentional.

[SvnLyrBrto]

This has become such a recurring theme with Nintendo that I can no longer believe it's anything but an intentional campaign to drive up hype with false shortages. Its not like they could be having hardware yield issues. It's been ages since Nintendo's hardware was anywhere near cutting edge. The NES Classic especially was just a bog-standard ARM with an emulator tacked on... the sort of kit that could easily be sourced by the hundred million from China. So there's no excuse for a production constraint. A failure in demand forecasting could be understandable once or twice. But after a few shortages, someone should and would have been fired for incompetence and replaced if said shortages were anything but intentional.

Basically, Nintendo is just screwing with us intentionally at this point. If I ever develop an insatiable desire for classic Mario; RetroPi looks the way to go. I'm certainly not going to go stand in their stupid lines.

Re:No way it's not intentional.

[Dutch Gun]

I think perhaps there's a different explanation. Nintendo is all about keeping hardware profitable, and they do this not only by using low-to-mid range component specs, but perhaps also by not over-investing in production capabilities. If you built production to meet initial peak demand, you'd probably waste a lot of capital building capacity you don't need later in the product life-cycle, as demand slows down and stabilizes.

I fail to see the logic in any company intentionally neglecting to supply expected demand for reasons other than a lack of capacity. It's the same argument that claims people or businesses only donate because of charitable tax-deductions or write-offs. The failure of that argument is that whatever savings are achieved via the tax writeoffs are far less than the value of what you donated to the charities. It's not really a money-making proposition - only an incentive. I think the same applies here. Whatever Nintendo theoretically gains via shortages are probably more than lost due to lack of sales. It's not like they're jacking up the prices of their hardware when demand exceeds supply (although plenty of scalpers do).

If anything, I guess you could argue that Nintendo is keeping production capacity low to protect their long term profits at the expense of their customers' convenience, forcing them to wait longer for the consoles they want.

Re:No way it's not intentional.

[thegarbz]

Its not like they could be having hardware yield issues. It's been ages since Nintendo's hardware was anywhere near cutting edge.

That is precisely THE problem with their hardware yield. They aren't top of the line, they are off the shelf. That means that they compete with other companies using off the shelf parts and the Switch shares hardware components with many popular mobile devices. Also the problem of Apple's influence on the market. The launch shortages on the Switch were entirely the fault of being unable to source the displays as the company which produced them previously supported Apple basically went bankrupt when Apple switched to OLED. Then Toshiba were unable to supply NAND chips, and the company producing the force feedback shakers were unable to do that either.

The problem here is that the Switch is a game console sold on a very limited profit margin. They can't outbid vendors of overpriced smartphones for parts.

The NES Classic especially was just a bog-standard ARM with an emulator tacked on... the sort of kit that could easily be sourced by the hundred million from China. So there's no excuse for a production constraint.

The NES Classic was intentional supply restriction. They wanted it to be a "limited edition" device from the get go. There was an entirely different strategy and purpose behind this console and the Switch, which is also why they stopped producing it when they launched the Switch. They were only using it to tease fans.

Re:No way it's not intentional.

[tlhIngan]

This has become such a recurring theme with Nintendo that I can no longer believe it's anything but an intentional campaign to drive up hype with false shortages. Its not like they could be having hardware yield issues. It's been ages since Nintendo's hardware was anywhere near cutting edge. The NES Classic especially was just a bog-standard ARM with an emulator tacked on... the sort of kit that could easily be sourced by the hundred million from China. So there's no excuse for a production constraint. A failure in demand forecasting could be understandable once or twice. But after a few shortages, someone should and would have been fired for incompetence and replaced if said shortages were anything but intentional.

Basically, Nintendo is just screwing with us intentionally at this point. If I ever develop an insatiable desire for classic Mario; RetroPi looks the way to go. I'm certainly not going to go stand in their stupid lines.

Actually, you're not wrong. Nintendo is famously known for under-supplying product, and this goes all the way back to the NES.

Yes, even in the NES days Nintendo deliberately short-produced product and rationed it to retailers. It was one way they put retailers on short leashes - if anyone decided to do something Nintendo didn't like, they'd cut what the retailer got.

Hell, even in the NES days Nintendo even deliberately short-produced cartridges! They claimed it was a production problem, but one that only seemed to have developers on a short leash (who were required to buy their cartridges from Nintendo).

Nintendo lives off the hype produced by short-selling. In fact, the only times I noted that Nintendo didn't actually short-ship was when there was actual competition. The Wii was easy to get on launch day - it was only the hype generated a week or two later with everyone and their grandma wanting one that ti became hard to get (Wii having launched on same day as PS3). And the later part of the Nintendo DS, when Sony was pushing their PSP as well as later on the PS Vita, it was easy to get Nintendo DSi, DSi XL, 3DS, etc units. Only when the PS VIta imploded did stock of the 3DS actually start diminishing.

The hype of selling out runs out pretty damn quick though - eventually people migrate to other systems, and you can bet Sony and Microsoft will be very aggressive this holiday season. Especially Microsoft, who saw how fast XBOX preorders went that they committed to extra production and thus opened preorders up again (only to have them go even quicker) - they know those XBOX buyers will sell their old consoles so this is a way to flood the market with cheaper consoles and cause serious competition.

Microsoft's doing it because people who want an XBOX and can't get one may buy a PS4 Pro instead, so ensuring people get what they want is key.

Nintendo's shortchanging the consumer, and they've been doing it for years. Though I'm surprised Switch availability is still hard, since in my shopping travels, if you can wait up to a week, I'll find a switch in a store somewhere without lining up - just on my walk or other regular shopping trip. Heck on Saturday evening I was at Wal-mart, and they had 4 new Switches. (They had 1 a couple of weeks ago, but in the intervening time, I saw Best Buy and others got Switches too).

Nintendo's thinking on the SNES Classic I don't get. Unless there were license limits (i.e., they could only sell 2.5M units total because the license holders let them sell that many) they could easily made twice that number. Or even bump up the price to $100 and still sell. And was there really any harm letting a few units sit on store shelves? Being able to pick one up even if they were out of production means they will move and it also means you produced just enough.

Obvious solution:

[Gravis Zero]

All you have to do is buy one made by another company. It's just a brand name, how different could it be? ;)

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[account_deleted]

Comment removed based on user account deletion

It's not a problem it's a plan.

[dicobalt]

This is what Nintendo does, it's their thing, it's an old school marketing tactic to create desirability for a product.

Re:Nintendo obviously screwed up

[thegarbz]

I'm interested in your thoughts. When you have a product with close to zero profit margin and your competing against other vendors with deep pockets when negotiating with suppliers what do you do?

a) attempt to outbid and sell the unit at a loss.
b) don't sacrifice your profit, create scarcity which in turn has some very positive marketing effects and drives sales even harder.

If they screwed up in your eyes, then you're not thinking.

False

[bobmajdakjr]

nintendo does not face or experience supply issues. nintendo /creates/ supply issues. they are king of artificial scarcity.