As Switch hardware sales dwindle, how long can Nintendo delay ‘Switch 2’?

Image: Nintendo Life / Zion Grassl

Nintendo’s report for fiscal year 2021/22 was released today, and while the Switch continues to sell well and software sales look healthy, signs are also evident that enthusiasm for the five-year-old system is beginning to wane. To be clear, the results present a far from gloomy outlook for the console and the company, but the numbers show a year-over-year sales decline of 20% and the company forecasts further declines for the coming year.

In real numbers, lifetime Switch sales now stand at 107.65 million units, of which just over 23 million came last year. That’s a very strong figure, and the direct sales (meaning the number of units actually sold to retail consumers, as opposed to the number shipped to retail stores) of the console in the last fiscal year is second only to the console release year. Digital sales were also up 4.5% during fiscal 2021, with the January-March 2022 period seeing the second-highest digital sales quarter ever, just shy of the previous lucrative 2021 holiday season. Certainly, all is not doom and gloom in Kyoto at the moment.

Even though there is still life in the system, there are definite signs that the Switch has peaked. Nintendo forecasts hardware sales of 21 million units next year, and while that’s still 3 million more than Sony is targeting for PS5, supply constraints are worse for the more powerful console, and Sony’s forecast for the fiscal year 2022 is considerably higher than PS5’s 11.5 million. It was sold in the last financial year. And let’s remember that the PS5s are still goose-toothed in retail 18 months after launch.

Although Nintendo has apparently struggled to produce hardware in sufficient quantities, the fact remains that demand for the hybrid console, while still healthy given its age, it is slowdown There are more than 107 million Switches in the wild, and while that number will continue to grow, the games industry is building on momentum, and the Switch is a well-known quantity at this stage.

switch games
There’s no shortage of games to play, that’s for sure. (Image: Nintendo Life)

There’s one thing Nintendo really needs to get those investor charts back on track: an influx of new and properly updated Switch hardware.

Global chip shortages and rising manufacturing costs are certainly weighing on Nintendo’s profits, with the shrinking profit margin on Switch OLED also seen as a contributing factor to the modest year-over-year gross profit increase of 0. .6% of the company. Regardless of the overall rosy though, negative numbers aren’t a happy read for investors and Switch OLED, while a good opportunity, was a stopgap solution.

There’s one thing Nintendo really needs to get those investor charts back on track: an influx of new and properly updated Switch hardware.

The long-rumored Switch ‘Pro’ or Switch 2 (or whatever you want to call the successor to the current model) has been on the tips of analysts’ tongues for years at this point. Given the cyclical and ongoing nature of the video game hardware cycle and the power deficit between the Switch and consoles from Microsoft and Sony, not to mention the fact that Nintendo pioneered the half-step, half-cycle console upgrade With its portable systems, discussion of potential new SKUs has been common since the Switch launched in 2017.

There was little need to push out an updated version as Switches flew off shelves as fast as Nintendo could make them, despite what enthusiasts and analysts might say. In fact, of the big three companies, the huge success of the Switch and its perennial software catalog has allowed Nintendo to weather the COVID storm and parts shortage better than it ever could have. While we’re not out of the woods yet, it looks more and more like someone who wants a Switch has one and more eyes that will never be on what’s next in the pipeline.

In an ideal world, Nintendo would surely be looking to release a successor to the Switch in the next year or so. The current model would continue to sell, but as the numbers dwindle, the new appeal is there to pick up the slack and drive profits. However, Nintendo is facing production issues it can’t control, some that may well be delaying plans for the next console, and issues that could ultimately hurt the company’s momentum. Switching can be a great source of income, but milking it out completely without an out-of-the-box replacement is not a sound business strategy.

OLED animal crossing
Evergreen, slow-burning games like Animal Crossing have helped the Switch navigate well so far (Image: Nintendo Life)

The moves are certainly ready for the successor, but given all the potential production hurdles, knowing when to pull the trigger on the follow-up is Nintendo’s main problem right now. Releasing a new console (backwards compatible, of course) alongside Zelda: Breath of the Wild 2 would make a lot of sense, with the ‘Spring 2023’ release date six years after the original. According to a survey we conducted on the subject, many Nintendo Life readers would opt for upgraded hardware along with the new Zelda; that’s the kind of move you’d expect Nintendo to make.

The moves are certainly ready for the successor, but knowing when to pull the trigger on the follow-up is Nintendo’s main problem now.

Rumors suggest that Microsoft paid to “jump the line” and get chip priority to make more Xboxes, and while Nintendo doesn’t want a penny or two, it can’t compete with Microsoft in terms of spending power. With companies having to queue up for components, it won’t be just Nintendo that will have to make the most of the status quo for longer than it would under normal circumstances. Plans to split your stock 10/1 are another indicator that you’re looking to dig in and make the most of things while the business remains strong.

In fact, we’ve even seen analysts offer much more sober estimates recently for when a successor to the Switch might appear, with dates like “late 2024” now being suggested. By then, the current console would be seven and a half years old, a retiree in modern gaming terms. There’s no question the system is capable of delivering great games just the way they are, and that’s not going to change, but for an industry and die-hard fan base that always has one eye on The Next Big Thing™, late 2024 It seems like an endlessly long wait for new Nintendo hardware.

In terms of profit, sure, Nintendo could afford to continue for another two years with its current offering, perhaps with a Switch Lite OLED thrown in for good measure. However, the perception that the company is out of business would be hard to shake, if not for gamers, then certainly for investors. A new Zelda will help, but Holiday 2024 seems a long way off.

Bloomberg reports that Nintendo president Shuntaro Furukawa “refused to comment when asked during a press briefing about when his company might introduce the next version of its flagship console,” and we’d be inclined to believe that’s a pressing question. within the walls of Nintendo. headquarters, too. It’s easy to make an announcement, but producing hardware at scale and meeting consumer demand is a challenge we certainly don’t begrudge the people working on the logistics for Nintendo’s next console release.

Let us know in the poll below when you think Nintendo will release its next console.

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