During the Q&A session of its financial results briefing for the second quarter of the fiscal year ending March 2027, Nintendo explained its response to rising prices of memory components and other materials, as well as its future pricing policy.
Manufacturing Costs on the Rise Due to Soaring Memory Prices
Regarding hardware pricing, President Shuntaro Furukawa explained, “Manufacturing costs are trending upward due to various external factors.” He outlined the company’s basic policy: to address cost increases up to a certain level through internal efforts such as improving production efficiency, and to absorb any remaining costs the company cannot fully cover, thereby “maintaining retail prices as much as possible.”
On the other hand, he clearly stated, “If, in light of the overall profitability of the business, we determine that the impact cannot be fully absorbed by our efforts alone over the medium to long term, and that it will be difficult to maintain a sound profit structure, we will need to consider price revisions.” This demonstrates the company’s commitment to prioritizing its medium- to long-term profit structure.
Software: “Pricing Will Be Set Individually to Reflect Value”
Regarding software, while packaged versions that use memory on game cards are affected by rising component prices, the company states that the impact is limited compared to hardware.
President Furukawa explained, “Our basic policy regarding software is to set prices commensurate with the value of each individual title.” He outlined the company’s approach, stating, “Rather than setting a uniform price, we will review and determine prices on a case-by-case basis, taking the content of each title into account.”
Inventory Assets Rise Sharply, Driven by Soaring Memory Component Prices and Planned Procurement
Inventory rose from 539.8 billion yen at the end of the previous fiscal year to 814.5 billion yen as of the end of September. President Furukawa cited several main factors for this increase: an increase in product inventory in preparation for the year-end shopping season, soaring prices for raw materials such as memory components, and planned procurement to ensure stable production.
Furthermore, he explained that the higher unit price of the Nintendo Switch 2 hardware compared to the company’s previous hardware models is also a factor driving up the total value of inventory.
Impact of Rising Component Prices to Widen Starting in the Third Quarter
Regarding the impact of soaring raw material procurement prices, President Furukawa explained that, compared to the initial launch of the Nintendo Switch 2, “procurement prices for raw materials have risen during the current period, and the impact of this is gradually becoming apparent.”
Furthermore, he stated, “From the third quarter onward, the proportion of raw materials procured at higher prices will increase compared to the first half, so we expect the impact of rising material costs to be greater than in the first half,” indicating that the impact is expected to grow in the future.
In Japan, sell-through has stabilized following the price adjustment
Regarding sales trends, the company assessed that the Nintendo Switch 2 has surpassed 25 million units in installed base approximately one and a half years after its launch, noting that “sales are progressing smoothly.”In Japan, a price adjustment was implemented in May; however, the company noted that “since its launch, adoption has progressed at an unprecedentedly rapid pace among our dedicated game consoles, and in addition, there was a rush of demand prior to the price adjustment,” leading to a temporary stabilization in sell-through following the adjustment.
In regions outside Japan, the price adjustment was implemented in September. Because the company took measures such as launching bundle packages containing the console and software during the period between the announcement and implementation, the company stated that “at this point, there is not as significant a difference in sales trends before and after the price adjustment as there was in Japan.”
President Furukawa emphasized the importance of the year-end shopping season, stating, “Now that we have implemented the hardware price adjustment, sales trends over the next few weeks will be crucial to achieving our sales targets.”
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