Faced with strong demand for its latest game console, the Switch, Nintendo (NTDOY) is reportedly gearing up to boost production ahead of this year's holiday selling period.
The Financial Times, citing people close to the company, said the Japanese game maker is being forced to increase production since the current stock isn’t meeting demand. With its latest gaming device selling faster than any of its previous systems, Nintendo is moving to boost the number of units it produces for Thanksgiving and Christmas sales, which often peak in late fall. The company is now targeting 18 million units of the Switch for the fiscal year ending in March 2018. Previously expectations were that it would ship 16 million of the gaming device in its fiscal year. One person close to the company told the FT the move to up production is also aimed at avoiding so-called “customer tantrums” as it rolls out its Mario Odyssey game for the Switch in November. That launch is expected to drive even more demand for the gaming system. (See also: Nintendo Switch Lifts Fortunes of Best Buy Stores)
The red-hot demand for the Switch and the difficulty many consumers around the globe are having in getting their hands on it has even sparked an informal market in which some retailers provide free guaranteed bookings for delivery on a specific date. Those who can get those shipping guarantees are turning around and selling them online. A Switch delivery for June is costing around $126, noted the FT. (See also: Nintendo Is Planning a 'Legend of Zelda' Smartphone Game.)
The move on the part of Nintendo to boost production comes at a time when it is in a race with the likes of Apple Inc. (AAPL) and other device makers for some key components that go into the Switch. According to a report in The Wall Street Journal earlier Tuesday, the company is facing a shortage of NAND flash memory chips, liquid crystal displays and the small motors that go into the hand-held controllers of the device. Many of the same components are found in smartphones, computers servers and other devices. The WSJ noted that given supply constraints, it will likely be hard for many consumers to get their hands on a Switch for the rest of 2017. It could also create a situation where the company is paying more to make the devices because of an increase in component prices. Nintendo has long said it doesn’t want to produce the Switch at a loss, but if it spends a lot more to secure supply of certain parts, it could push the cost over the retail price of $299.