Nintendo says it's expecting 10% fewer Nintendo Switch sales this year despite strong demand for the console. This revised forecast is largely due to the ongoing chip shortage, issues with the supply chain, and the Shanghai lockdown contributing to manufacturing problems.
Why has Nintendo cut its Switch sales forecast?
According to Nikkei, Nintendo says it expects to sell around 20 million Switch consoles around the world this fiscal year. This figure is down 10% from the 2021 fiscal year, in which the Switch dominated in terms of hardware sales and even managed to break its own financial records in the UK and Europe. This year, however, the ongoing chip shortage, as well as what Nikkei calls "disruptions to logistics networks", are hampering Switch production, meaning Nintendo simply can't manufacture enough consoles to meet demand.
The "logistics" issues that Nikkei alludes to are likely to refer, at least in part, to the Shanghai lockdown, which is causing production and shipping problems. Nintendo has a strong software slate due to launch this year, including open-world RPG Xenoblade Chronicles 3, multiplayer arena shooter Splatoon 3, and Mario Strikers Battle League, which is slated for launch this summer. It's likely Nintendo will be relying on these games to shore up its profit margins after this hardware disappointment, but only time will tell whether that strategy will be successful or not.
The chip shortage is hitting many companies hard
It's not just Nintendo that is suffering because of the chip shortage. Pat Gelsinger, CEO of Intel, recently told CNBC that he expects the semiconductor shortage to continue until at least 2024. Gelsinger says this is because the shortages "have now hit equipment" and as a result, manufacturing is struggling more. In fact, according to multinational accounting firm KPMG, 56% of chip industry leaders expect the shortage to continue into next year. The chip situation is not looking good for the tech industry, at least in the short term.
The chip shortage has also hit sales of next-gen consoles hard. Both the PS5 and the Xbox Series X|S have suffered due to stock issues; while sales for both consoles have been the fastest in their respective lines, it's still extremely difficult to actually buy either a PS5 or a Series X (although the Series S is more widely available). One imagines that despite high sales numbers for Sony and Microsoft, these numbers would be even more impressive if the chip shortage hadn't constrained sales to such a degree. We'll bring you more on this as soon as we get it, but you might want to bed in for more semiconductor shortage woes in the future.