Nintendo Switch 2

[Roly]

I think it was probably difficult to perceive that opportunity sufficiently ahead of time (with software and similar)- but I agree.

I tend to think trying to increase install base more rapidly in the rest of the world makes more sense. So redirect supply there, potentially with a slight pre-holiday price cut.

It seems to me that there is not going to be confidence and clarity in the US market in the near term, and economic conditions may be a little more likely to decline there such that all discretionary purchases will be under greater pressure (a risk everywhere, but probably slightly less severe - though I have no idea).

 

[arandomguy]

A consideration is the optics of the US market. This was really evident in the Xbox 360 and PS3 generation in which the general perception was that the 360 was very successful relative to the PS3 but lifetime global sales of them were actually really close, except in the US in which the 360 was considerably ahead.

You see this in some other situation a well in which how the situation in the US drives the discourse and how companies may focus the marketing efforts their.

With this launch there's already some speculation on how Nintendo may try to adjust for the US even if it's at the expense of other markets. For instance with the speculation on why they are delaying Canadian pre-orders as well.

 

[Roly]

I suppose it seems to me that all of the options are not great - and for rates between 25 - 104 percent (at the moment), their capacity to use the less wealthy markets to subsidize the US market seems perilously limited. Losing considerable money and still encountering lacklustre sales in the US seems a risk.

If inclined to lose money per console, I'm not sure why a price cut for Europe and RoW to build install base more rapidly there would not be more efficient - as opposed to trying to soften the impact (partially) in the US - but again, I have no idea.

Re-assess and consider options continuously, potentially for a holiday launch in the US if conditions allow - though I appreciate that conditions may be worse by then.

 

[arandomguy]

Well this is certainly going to be interesting in that the tariffs have now been paused to 10% for 90 days except to China which is now at 125%. So Nintendo's Vietnam bet may yet pay off?

$450 Switch 2 vs. $1000 competitors, tune in next week

 

[Charlietus]

Well this is certainly going to be interesting in that the tariffs have now been paused to 10% for 90 days except to China which is now at 125%. So Nintendo's Vietnam bet may yet pay off?

$450 Switch 2 vs. $1000 competitors, tune in next week

Vietnam about to become the industrial center of the world

 

[iroboto]

Well this is certainly going to be interesting in that the tariffs have now been paused to 10% for 90 days except to China which is now at 125%. So Nintendo's Vietnam bet may yet pay off?

$450 Switch 2 vs. $1000 competitors, tune in next week

this is insanity. The market manipulation here is madness. It's not worth buying and selling in this environment. Just going to lose your shirt.

 

[Charlietus]

this is insanity. The market manipulation here is madness. It's not worth buying and selling in this environment. Just going to lose your shirt.

Market Manipulation by the president of the United States no less. This morning he wrote that it was a great time to buy ffs. He is running the country like an illegal joint or something.

 

[iroboto]

Market Manipulation by the president of the United States no less. This morning he wrote that it was a great time to buy ffs. He is running the country like an illegal joint or something.

agreed.
Though I don't want to get political here, so I'll stop my commentary on that one here.

Sticking to the topic, it looks like NSW2 will launch at 450 USD then. Assuming these 90 days hold. Everyone else that is producing in Foxconn is in trouble it looks like.

 

[Charlietus]

agreed.
Though I don't want to get political here, so I'll stop my commentary on that one here.

Sticking to the topic, it looks like NSW2 will launch at 450 USD then. Assuming these 90 days hold. Everyone else that is producing in Foxconn is in trouble it looks like.

From my limited research of 5 minutes, Playstation, Xboxes and rtx cards are mostly produced in china. So Nintendo is probably safe for a bit, but the others are probably going to start moving to Vietnam and similar immediately.

Sony said that it stocked up many PS5's in anticipation of tariffs, so maybe they have bought some time. It depends on how long it takes to transfer manufacturing to another country. They could also expand the production that they have in Japan.

 

[wco81]

So a lot more people may preorder if they open it back up again, on the assumption that it's covered by the pause.

Including many people who weren't planning to get it at launch but maybe a few months later.

 

[arandomguy]

From a pure numbers perspective it seems like Nintendo's strategy should be to divert all shipments to the US even if it means essentially no launch stock elsewhere. From an optics perspective and PR management stand point though that will be tricky.

 

[cheapchips]

Hands off the rest of the world's allocation!

They could just sent all the US allocation to Blue states.

 

[Roly]

From a pure numbers perspective it seems like Nintendo's strategy should be to divert all shipments to the US even if it means essentially no launch stock elsewhere. From an optics perspective and PR management stand point though that will be tricky.

Who knows - I can definitely see the logic, but that seems risky to pursue in a maximal manner. You might be denuding the rest of the markets of stock at and near launch for no or even perverse ('negative') reason, and that seems a disaster.

It still attracts at least a 10 percent tariff (cutting into margin)? Potentially having them at port and not clearing customs until the absolute last moment possible - in case there is a positive (or negative) change in the tax.

If they cross customs beforehand, and there is a change to zero, that seems a major, major problem. If it goes back to ~50 percent (Vietnam), it may seem prudent to have done it - but the consumer market more widely might be very, very different if that has happened.

There might be a good degree of uncertainty about demand curve at given price now, given a US consumer market which may be under substantial pressure with discretionary purchases by June and July.

I think you would want to have the capacity to pivot into a campaign that leant into emphasizing accelerated uptake in RoW.

 

[Roly]

I think from a numbers perspective I would not change anything (it is 10 percent for Vietnam, for the next two months, apparently, maybe).

And from a sentiment perspective, I would think it very unwise to divert stock. You might need those markets - and you've just told them they how little they are valued by cancelling their preorders. They were going to be the markets where you were not absorbing a tax by cutting the wholesale price.

You are also potentially absorbing shipping costs - moving stock from their European and RoW distribution sites, back to port, and across oceans. That stock has now incurred shipping from production site to original destination markets. Maybe shipping costs have fallen with the tariffs destroying demand, but maybe it goes up if there is residual effort to 'front run' the tariffs.

Unless I am missing something, I think it would be unwise?

 

[pcchen]

Nintendo is willing to sell a Japan only version much cheaper, which is very likely to be just barely profitable, or even unprofitable, I don't think they'll divert all shipments to the US, even if it makes more money.

 

[Roly]

It depends on how long it takes to transfer manufacturing to another country. They could also expand the production that they have in Japan.

I think this seems like a real difficulty - what tariff rates are you assuming before large amounts of capital expenditure? If it was economic to do so without tariffs, you would have done it already - and it only makes economic sense if the tariffs are assured for some period, at some rate. What margins on the product are you going to have even from the lower tariffed country, at what labor price etc. (assuming that labor price responds somewhat to local labor demand, which would go up presumably if there is a large inflow of manufacturing into particular countries). Raw materials and construction labor for that plant probably get bid up as well if there is a 'shock' inflow of effort to build capacity.

Maximizing existing capacity in lower tariffed areas makes sense (though if it was normally economic to do so - you would have done it), but I'd be pretty nervous about de novo building new plant. You will have to pass that cost on as well - for quite a number of years.

 

[Roly]

I was wondering if - as a last resort - they could cloud stream Switch 2 exclusives to Switch One, at a special US premium tier of NSO, say partnering with Nvidia. There are probably lots of great reasons why it is a dreadful idea.

 

[Karamazov]

there are already Switch 1 games that are just streamed versions, such as Guardians of the Galaxy.

 

[nbohr1more]

I guess there are a few remaining questions about Nintendo vs T239:

1) Is this really a salvaged T234 or did Nintendo take T234 and ask to customize it with ( for example ) Ada Lovelace RT features ?

2) Is it possible to use RT cores from otherwise disabled SM's? ( Eg, instead of 12RT cores, it will have 14 or 16 )?

3) In a similar line of reasoning, could they have partially enabled other parts of the SM's and use the execution units for improved performance \ features?

I'm strongly inclined to think that T239 is nothing more than a cut-down \ salvage part but I wonder if anyone has any hint to the contrary?

 

[Roly]

That's a great point about the streamed versions already for some games - so it has been done on the system, I had forgotten that completely.