Nintendo to raise Switch 2 prices as chip costs climb, profit outlook weakens

TOKYO: Nintendo said on Friday it will increase the price of its Switch 2 gaming console in key markets as rising memory chip costs squeeze the business, while forecasting a sharp decline in profit for the current financial year.

The Japanese gaming company said the Switch 2 price in Japan will go up by 20 per cent from May 25. It also said prices will rise from September 1 in the United States by 11 per cent to $499.99 and in Europe by 6 per cent to 499.99 euros.

For the year ending next March, Nintendo expects net profit to fall 27 per cent to 310 billion yen, equivalent to $1.98 billion, on sales of 2.05 trillion yen, which would represent a decline of 11.4 per cent. The company also projected operating profit of 370 billion yen, a figure Bloomberg News said was well below the average analyst estimate of 480 billion yen.

Nintendo said in a statement that net profit jumped 52 per cent to 424 billion yen in the last financial year, while annual sales reached 2.31 trillion yen, nearly twice the level recorded a year earlier.

“Nintendo Switch 2 got off to a good start following its launch in June and global sales continued to grow after that,” the company said.

According to Nintendo, it sold 19.86 million units of the new console by March, helped by titles including Pokemon Pokopia, Mario Kart World and Donkey Kong Bananza.

Memory chip prices pressure console makers

Higher memory chip prices, driven by the artificial intelligence boom, have affected manufacturers of gaming consoles, smartphones and other electronic devices. Supply difficulties have been worsened by disruptions linked to the Iran war.

Sony, whose PlayStation5 has already become more expensive, presented a comparatively stronger outlook. The company said on Friday it sold 16 million PlayStation5 units in the past fiscal year, down from 18.5 million in the previous year.

With 92 million PlayStation2 units sold since its launch in 2020, analysts said Sony was in a strong position to benefit from the release of Grand Theft Auto VI, which is due in November.

“If there is a game that can sell PlayStations by the millions, it is this one,” gaming industry consultant Serkan Toto told AFP.

Sony said its game division is expected to post higher profits in the year to March 2027 even as console sales decline.

“Sony’s more mature PS5 console cycle leaves it better placed to weather higher memory costs,” said Amir Anvarzadeh, strategist at Asymmetric Advisors.

“Having already moved past the heavy hardware penetration costs typical of earlier years, Sony’s bottom line stands to benefit significantly from the high-margin software sales and ecosystem engagement this launch should trigger,” Anvarzadeh said.

By contrast, Toto said Nintendo faces a tougher environment because Switch 2 buyers are “especially price sensitive”.

“The first year game lineup for Switch 2 is much weaker than for its predecessor,” he said. “But now it’s time for them to really step on the gas on the software side.”