Nintendo is reportedly struggling to secure essential components for the Switch because of government-imposed lockdowns in Malaysia and the Philippines.
People familiar with the issue told Bloomberg that the shortages would likely limit production this year. The news comes after Nintendo reportedly planned to ramp up production and make more Switch consoles than last year.
Nintendo sources printed circuit boards (PCBs) from Malaysia while the Philippines provides passive components that attach to those PCBs. Both countries limited business operations and travel as part of efforts to reduce the spread of COVID-19.
While Malaysia officially relaxed its lockdown on May 4th, states delayed easying rules due to lack of preparation. At the same time, companies struggled to get workers tested before resuming work. The Philippines is considering reducing some lockdown measures starting May 15th.
Bloomberg reports that restrictions will make it hard for Nintendo to exceed its forecast of 19 million Switch unit sales in the current fiscal year. In the company’s previous fiscal year, it sold 21 million consoles.
It also puts Nintendo in an awkward position as the Switch is out of stock in many markets at a time when the console is exceedingly popular. Its popularity is in part due to the success of the recent Animal Crossing: New Horizons game, which arrived near the start of the COVID-19 pandemic and has enjoyed immense social media attention from people isolating at home.
Nintendo’s ability to restore full production capacity relies on how the pandemic situation plays out. Further, the company may have to push back the release of some games and services if things don’t improve.
The shortages mean Nintendo can’t capitalize on Switch popularity before the competition arrives
The current PCB and passive component shortages aren’t the first Nintendo has had to deal with. Previously, a production bottleneck led to limited access to DRAM . Nintendo has to compete with smartphone makers for DRAM and the shortage could impact both Switch and smartphone availability later in the year.
What’s worse for Nintendo is that it cannot capitalize on the popularity of its hardware ahead of new console launches from its competitors later this year. Both Microsoft and Sony plan to launch new Xbox and PlayStation devices later this year, which will likely eclipse the Switch in popularity. Further, neither company is affected by the current shortages since they components from other countries. That’s not to say Microsoft and Sony won’t be impacted by COVID-19, however.
If Nintendo’s supply woes continue, the company could struggle to produce enough units for the upcoming holiday shopping season as well.