To End the Switch Shortage, Nintendo May Have to Go to War With Apple

An interesting report from The Wall Street Journal has surfaced this morning, painting a picture of rivalry between Nintendo and Apple. The two companies recently joined forces for the immensely successful launch of Super Mario Run, which was made available on iOS devices a month before it came to Android. According to the report, Apple and its production demands could be the main obstacle standing in the way of Nintendo remedying the Nintendo Switch supply dilemma.

Here's the deal: Nintendo has told suppliers and assemblers that it wants to produce almost 20 million units of the Nintendo Switch this fiscal year. We're talking roughly 18 million units produced by next March. Nintendo's initial sales goal was to move 10 million Switches in that time, but as we're seeing, demand is far outpacing all original projections, and Nintendo thinks it can sell many more Switches in that time.

The problem is "an industrywide capacity shortage for components used in smartphones, computer servers and other digital devices." While the Switch is a unique console with several proprietary components, it also uses common bits and bobs found in common tech. The NAND flash memory chips that make up the Switch's internal storage, the beautiful LCD screen, and the special motors that make HD rumble possible in the Joy-Con... All of these components are in demand from other companies as well, namely Apple, and there's not enough to meet the sudden spike in demand.

As Nintendo plans to ramp up production and demand for these components for the Switch, so too is Apple planning on an ambitious season of production and sales as it ramps up to release the iPhone 7 and a special model to celebrate the 10th anniversary of the iPhone. While this sounds like great news all around, the fact is that a supply shortage means not everyone will get everything they need, when they need it.

According to the WSJ report, if anyone is going to get left out in the cold, it's likely to be Nintendo. "Analysts say rivals for the sought-after parts can often offer better terms than Nintendo. Makers of data-center servers tend to use newer and higher-margin components, while smartphone makers issue larger orders than Nintendo." Those data-center server producers will be making aggressive bids for flash memory components, while Apple will be demanding screens from Japan Display, Inc., which is the sole supplier of iPhone displays and the screens which go into the Nintendo Switch itself.

Here's hoping that Nintendo will be aggressive. It seems doubtful, though. President Kimishima has stated outright that he won't sell the Switch at a loss, so we doubt that Nintendo will go to great lengths to procure these components if Apple decides it wants to compete directly.

We'll keep you updated as the situation evolves; stay tuned to WWG.