[TOKYO] Nintendo is gearing up for record software and Switch sales in the coming year, a much stronger performance than investors are projecting, according to the company's partners and suppliers.
Kyoto-based Nintendo is planning for sales of its signature Switch game console to be flat or slightly higher in the fiscal year ending March 2022, boosted by the introduction of a version with an OLED display, according to executives at allies including component suppliers, software publishers and retailers. Analysts have forecast console sales would decline next year.
A series of marquee game releases is expected to drive software sales next fiscal year to 250 million units, far more than the record 205 million units forecast for the current year, according to the partners and suppliers, speaking anonymously as the plans are not public. Analysts have also projected software sales would fall next year.
Some of the suppliers have been briefed while other partners established their own forecasts based on orders. A Nintendo spokesperson declined to comment.
Nintendo's shares reversed early morning losses and finished up 1.6 per cent in Tokyo on Monday.
The coronavirus outbreak was at first a brake and then an accelerant for Nintendo, choking its supply and logistics before triggering a demand surge with global lockdowns driving people to seek entertainment and escape.
The company's Animal Crossing: New Horizons turned into the ideal virtual hangout for stress relief, juicing Switch sales and hastening the transition from packaged software to digital downloads.
"Nintendo will need to start the next fiscal year without Animal Crossing and the pandemic, but that will be offset by a much stronger blockbuster software lineup and new hardware," Serkan Toto of game consultancy Kantan Games said.
Nintendo plans to release a revised version of the Switch in the latter half of this year with a larger and better display as well as upgraded graphics when the hybrid console is plugged into a TV set, Bloomberg News has reported.
The company makes some of the biggest blockbuster games on its platform, which contribute significantly to profit and also spur hardware adoption. Much of this year's lineup of new games remains unannounced.
The Switch and Switch Lite continue to sell well, due in part to poor supply of Sony's PlayStation 5 and Microsoft's Xbox Series X released in November, according to Astris Advisory Japan's David Gibson. But the lack of visibility around Nintendo's upcoming games slate has prompted skepticism about the company sustaining its recent success.
"With or without an upgraded Switch, Nintendo's hardware sales would probably decrease in the year from April," according to Bloomberg Intelligence's Matthew Kanterman.
Nintendo's ability to fulfill demand for the Switch will be challenged by the same global chip supply bottleneck that has troubled its rivals. Beyond securing silicon from the likes of Taiwan Semiconductor Manufacturing Co, the Switch maker also faces scarcity of more generic parts like display driver integrated circuits and Bluetooth modules, people familiar with its operations said. Component suppliers said shortages would persist at least until June and the situation may not improve for the rest of the year.
Makers of NAND flash memory - the media on which packaged Switch software is sold - are preparing more units for the coming fiscal year than they supplied in the current one, the people involved in the supply chain said.
Software developers similarly are prioritising the Switch for their upcoming game releases as the console is almost certain to surpass the 100 million units sold threshold, assuring a large audience of potential customers. Nintendo had sold 80 million Switch devices as of the end of 2020.
Games announced for this year so far include several Pokémon titles and popular third-party games such as Fall Guys by Mediatonic. Though Nintendo's release schedule for the second half of the year remains vacant, it delivered a positive surprise by announcing Splatoon 3 for 2022 last month, said Astris Advisory's Gibson, indicating a strong games pipeline for the long term.
"The Switch is in the middle of its life cycle," Nintendo president Shuntaro Furukawa said in February.