Nintendo warns chip crunch may hit Switch despite gaming boom

Tokyo

NINTENDO's earnings beat estimates after hit games such as Monster Hunter Rise propped up sales of the Switch, but warned that global chip shortages may disrupt production of its marquee device.

Nintendo's better-than-expected results suggest the Covid-era boom in gaming that turned Animal Crossing into the world's online town hall has legs. The Kyoto-based studio reported operating income of 119.5 billion yen (S$1.5 billion) for the March quarter, trouncing the average forecast of 68.3 billion yen.

It forecast 500 billion yen in operating profit this year, although Nintendo, like many Japanese companies, often begins the fiscal year with a conservative outlook so it has room to raise the figure later.

The company is targeting sales of 25.5 million consoles in the current year ending March 2022. That is after selling 28.8 million Switch units in the prior fiscal year, surpassing the 26.5 million it projected.

President Shuntaro Furukawa told analysts on Thursday Nintendo aims to surpass its official goal of selling 190 million Switch software units this year. The handheld-hybrid Switch maintained momentum in the face of widespread component shortages and newer gaming machines from Sony Group and Microsoft.

Nintendo's signature device rode blockbuster titles including Capcom's latest Monster Hunter instalment and Konami Holdings' Momotaro Dentetsu during the period.

Nintendo's own product lineup has been quiet in recent months. Bloomberg reported that the company plans a big roll-out of new titles alongside an upgraded version of the ageing Switch - with faster Nvidia graphics and a Samsung organic light-emitting diode (OLED) display - in the second half of the year.

Bloomberg Intelligence analysts Matthew Kanterman and Nathan Naidu said that Nintendo needs to drive software sales, live services and mobile games to support earnings growth beyond this fiscal year ending March, as the Switch platform enters the mature phase of its cycle.

Switch hardware sales may peak in 2020 absent a reported but as yet unconfirmed Pro version, putting greater onus on software to drive profit, they added.

The coronavirus outbreak was at first a brake and then an accelerant for Nintendo, choking its supply chain before triggering a demand surge with global lockdowns driving people to seek entertainment and escape.

Its 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's shares closed 1.7 per cent lower on Thursday before the results, taking losses this year to 6.4 per cent. BLOOMBERG