How long can Nintendo delay ‘Switch 2’ as Switch hardware sales are slow?

Image: Nintendo Life / Zion Grassl

Nintendo’s report for FY 2021/22 is down today, and while Switch continues to sell well and software sales look healthy, there are also signs that enthusiasm for the five-year-old system is beginning to wane. To be clear, the results are far from bleak for the console and the company, but the numbers show a 20% year-over-year drop in sales and the business forecasts further declines for the coming year.

In real numbers, lifetime Switch sales now stands at 107.65 million units, with just over 23 million in the last year. That’s a very solid figure — and resale (meaning the number of units actually sold to consumers at retail as opposed to the number shipped to retail) of the console in the past fiscal year is second only to the console’s launch year. Digital sales also grew 4.5% from FY 2021, with the January-March ’22 period recording the second-highest digital sales quarter on record – just slightly less than the previous lucrative Holiday ’21 season. It’s certainly not all doom and gloom in Kyoto right now.

Despite there still being life in the system, there are clear signs that Switch has reached its peak. Nintendo forecasts hardware sales of 21 million units in the coming year, and while that’s still 3 million more than Sony is targeting for PS5, the supply constraints are worse for the more powerful console – and Sony’s FY 2022 forecast is significantly higher than the 11.5 million PS5s it sold in the past fiscal year† And let’s not forget that 18 months after launch, PS5s are still like chicken teeth at retail.

While Nintendo has apparently struggled to produce hardware in sufficient quantities, the fact is that demand for the hybrid console, while still healthy given its age, is is to delay. There are over 107 million Switches in the wild, and while that number will continue to grow, the gaming industry is built on momentum, and Switch is a very well-known amount 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 pointing upward again: an influx of new, well-upgraded Switch hardware.

The global chip shortage and rise in manufacturing costs are undoubtedly hurting Nintendo’s profits, and the reduced profit margin on Switch OLED is also noted as contributing to the modest 0.6% increase in gross profit on Nintendo Switch. annual basis. Regardless of the overall rosiness, however, minus numbers don’t make for happy investor readings and Switch OLED, while a welcome shot in the arm, was a stopgap.

There’s one thing Nintendo really needs to get those investor charts pointing upward again: an influx of new, well-upgraded 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 tip of analysts’ tongues for years right now. Given the cyclical, advancing nature of the video game hardware cycle and the power shortage between Switch and Microsoft and Sony’s consoles — not to mention Nintendo pioneered the mid-cycle, half-step console upgrade with its handheld systems – debate about potentially new SKUs has been common since Switch launched in 2017.

There was little need to release an updated version as Switches flew off the shelves as fast as Nintendo could make them, despite what hardcore enthusiasts and analysts may think. Of the three major companies, the massive success of Switch and its evergreen software catalog has enabled Nintendo to weather the storm of COVID and parts shortages better than it could. While we’re still not out of the woods, it increasingly feels like everyone who wants a Switch has one and has more eyes than ever on what’s in the pipeline.

In an ideal world, Nintendo would certainly like to launch a Switch successor next year or so. The current model would continue to sell, but as the numbers dwindle, the new hotness is there to take the slack and boost profits. However, Nintendo is dealing with production issues it can’t control – issues that could potentially delay plans for the next console, and issues that could ultimately affect the company’s momentum. Switch may be a huge cash cow, but milking it completely dry without a ready-to-use replacement isn’t a good business strategy.

Animal Crossing OLED
Evergreen, slow-burn games like Animal Crossing have helped Switch just fine so far (Image: Nintendo Life)

There’s bound to be moves for the sequel, but given all the potential production hurdles, Nintendo’s biggest problem now is knowing when to pull the trigger on the follow-up. In addition to the launch of a new console (backwards compatible, of course) Zelda: Breath of the Wild 2 would make perfect sense, given that the ‘Spring 2023’ launch date comes six years after the original. According to a poll we conducted on the topicmany Nintendo Life readers would jump on upgraded hardware alongside the new Zelda – that’s the kind of step you’d expect from Nintendo.

Movements are undoubtedly in place for the successor, but knowing when to pull the trigger on the follow-up is now Nintendo’s biggest problem

rumors suggest: that Microsoft paid to “stand in line” and get chip priority to produce more Xboxes, and while Nintendo doesn’t want a cent or two, it can’t compete with Microsoft in terms of sheer purchasing power. With companies having to queue for components, it won’t just be Nintendo that will have to make the most of the status quo for longer than normal. Plans to split his stock 10/1 are another indicator that it wants to pull back and make the best of things while things are still going strong.

In fact, we’ve seen analysts recently come up with much more sober estimates about when a Switch successor could be out, with dates like “late 2024” is now suggested. By then, the current console would be seven and a half years old — a retiree in modern gaming terms. There’s no doubt that the system is capable of delivering great games as it is, and that won’t change, but for an industry and a hardcore fan base that always has one eye on The Next Big Thing™, the end of 2024 seems like an endless long wait for new nintendo hardware.

In terms of profits, Nintendo could afford to rest on its current offerings for another two years, perhaps with a Switch Lite OLED for the record. However, the perception that the company is standing still would be hard to shake – if not for gamers, then certainly for investors. A new Zelda will help, but Vacation 2024 still feels a long way off.

Bloomberg reports: that Nintendo president Shuntaro Furukawa has “refused to comment when asked during a media briefing about when his company might unveil the next iteration of its marquee”, and we’d be inclined to believe this is an urgent 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 challenging. We certainly don’t envy the folks handling the logistics for Nintendo’s next console launch.

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

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