Nintendo closed out its year-end reports with an investor Q&A session that has only just recently been translated and released online. In it, Nintendo president Tatsumi Kimishima fields questions about everything from the origins of Nintendo’s Switch sales projections to the company’s recent refresh of the 2DS/3DS family of hardware.
The company also has lofty goals for its new flagship system. After exiting its launch month with 2.74 million Switch sales worldwide, Nintendo believes that the Switch has a fighting chance at selling as much as the Wii did following its launch a decade ago.
But the interesting information contained within this investor Q&A doesn’t end there. While the full, 7-page document is well worth a read itself, a handful of notable comments from Kimishima on Nintendo’s future can be found just below.
Switch hardware costs and profitability will change as production ramps up
Nintendo doubled its production plans for the Switch after the console's launch exceeded the company's previous expectations. One questioner noted that Nintendo has previously said that the Switch's "hardware pricing is set just high enough to stay out of the red" and inquired if the company's doubled production and heightened sales projections would eventually mean the company would see more per-system profit.
In response, Kimishima said that production quantities would need to reach a certain level before cost reductions factored into the equation, but that the 10 million milestone would no doubt impact that.
"We priced the Nintendo Switch hardware to have no negative impact on overall earnings," said Kimishima. "As for the profitability of the hardware, our production quantities will need to reach a certain level before we see any cost reductions. Volume efficiencies will start to emerge once we produce the 10 million units we expect to ship this fiscal year, but we will not get the benefit of this right away."
Nintendo is boosting production to avoid a Wii-like holiday shortage
Kimishima noted that the Switch seeks to emulate the Wii's success, but the company is working to make sure the Switch avoids the inventory issues that led the Wii's rarity during its first holiday season. Originally, it looks like Nintendo was planning on slowly building its inventory to prepare for the holiday season but already high demand may have thrown a wrench in those plans.
"We started production for Nintendo Switch in and after summer of last year and were preparing for launch over the course of several months."
"Since the demand for the hardware is significantly high right now, and we cannot build up inventory over a long period of time (as we did before launch), we have greatly increased the quantity we can produce in a single month. We cannot provide any specific numbers, but we are boosting our production capacity to enable us to ship 10 million units this fiscal year and handle the season of high demand."
Shipping 10 million units is "fundamental" to both Nintendo and publishers
Kimishima mentioned the company's projected Switch sales for the current fiscal year at every turn, and later explained how hitting that 10 million target would benefit both Nintendo and its partners. Ultimately, Nintendo's goal is to see another console reach the level of success as the original Wii. That system launched in 2006 and sold around 100 million units during its lifetime. Kimishima notes that the Switch's strong launch gives it the kind of momentum it would need to make Nintendo's hopes a reality.
"For us, being able to reach an installed base of more than 10 million units is fundamental to creating a strong business in a number of different ways. Shipping 10 million hardware units this fiscal year, as planned, will give publishers and the rest of our business partners a sense that the future of Nintendo Switch is more promising. This is another part of the reason why we are planning to ship 10 million units this fiscal year," he said.
"And if our sales go according to our plan this fiscal year, we will be able to see Nintendo Switch gaining the momentum in which it can approach relative parity with Wii afterwards."
System lifecycles should be flexible, not strictly timed
Towards the end of the session, Kimishima touched on the company's recent announcement of a New 2DS XL and what that system refresh means for both Nintendo's portable and console hardware. He said that the 3D-less clamshell handheld announced last week reflects the company's decision to evaluate hardware cycles to meet the needs of consumers going forward.
"Our expectation is that if we are able to continue to provide enjoyable software, we will always meet the needs of consumers who want to continue playing on the existing Nintendo 3DS series," said Kimishima. "To that end, we are always thinking about what kinds of software consumers are going to want, and evaluating our hardware cycles to make sure that we are meeting that need. This means that our product lifecycles are not going to last for a set number of years but will be flexible enough to change when required by changing consumer needs."
"In general, this is the sort of thinking we want to adopt for all our hardware development. We want to have flexible hardware cycles where the launch of new hardware sets off the development of the next hardware that will respond to consumer trends."