Nintendo Switch 2 could get more expensive as DRAM and NAND costs spike

[midian182]

Ripple effect: Nintendo is experiencing the same headache with the rising price of memory as everyone else: the Japanese gaming giant faces paying more in manufacturing costs for the Nintendo Switch 2 as DRAM and NAND prices skyrocket. Investor concerns over the situation have seen the company's shares plummet this month, wiping up to $14 billion off its market cap.

The memory shortage crisis, a result of the huge demand from AI companies, has sent DRAM prices through the roof. According to Bloomberg, Nintendo is now paying 41% more for the 12 GB LPDDR5X modules used in the Switch 2 than it did three months ago.

It's not just DRAM, either. The price of 256GB of NAND flash memory in the handheld console has risen by 8%. This change is plain to see in the high prices of microSD Express cards, used to expand the Switch 2's storage. "This is effectively a cost that Nintendo has passed onto the gamer," Pelham Smithers of Pelham Smithers Associates told Bloomberg.

Specific data on the exact profit per unit for the Switch 2 isn't officially disclosed in Nintendo's public reporting. However, industry reports and retailers suggest that the company may be making very low profit (or near zero margin) on individual Switch 2 hardware units at launch, focusing more on building a large installed base.

A significant increase in the bill of materials like this could be too much for Nintendo to absorb, which would mean the extra costs being passed on to the consumer in the form of a price hike.

Also read: AI Is Eating All the DRAM. DDR5 Prices Just Doubled. GPUs Could Be Next.

Nintendo does expect the Switch 2 to continue selling well. At the start of November, it increased the expected number of unit sales through to March 2026 from 15 million to 19 million. It'll be interesting to see if that pans out should Nintendo increase the price of the hybrid device.

The memory crisis has seen the price of DRAM rise to comical heights – some stores stopped listing them due to their volatility. Right now, many DRAM kits are more expensive than consoles or even high-end graphics cards. With laptops, storage, and GPUs likely to be affected as time goes on, it's starting to feel like the covid years all over again.

Image credit: Daniel Romero

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Nintendo Switch 2 could get more expensive as DRAM and NAND costs spike

 

[Alsotrue]

Nintendo can easily absorb it in the revenue from the games. Shareholders can make do with a little less dividend for a certain period.

 

[Rapob]

Lenovo raised prices by 10% on laptops and will raise them again in january too.

This will end up affecting all tech. Desktop, laptop, phones, tablets, consoles...

PS6 was supposed to get 32GB RAM, might get only 20-24GB if this continue.
5000 SUPER with 50% more VRAM, postponed and maybe cancelled.

 

[amstech]

Meanwhile, everything you own and wear says "made in china" on it.

 

[Dysnomia]

Nintendo can easily absorb it in the revenue from the games. Shareholders can make do with a little less dividend for a certain period.

...however, they won't because this isn't how the world works.

Just curious why you think they would want to do that? In a public company, every executive would be removed from office if they did that.

 

[Theinsanegamer]

...however, they won't because this isn't how the world works.

Just curious why you think they would want to do that? In a public company, every executive would be removed from office if they did that.

Hey, remember when Nintendo's execs all took a pay cut so they could keep developers employed after the wii u failed?

Almost like "screw the consumer up the arse with as big a ram you can find" isnt the only option. Imagine that!

 

[Dysnomia]

Hey, remember when Nintendo's execs all took a pay cut so they could keep developers employed after the wii u failed?

Almost like "screw the consumer up the arse with as big a ram you can find" isnt the only option. Imagine that!

That seemed to me to be more of a Japanese culture type of thing though. They kind where they take ownership of the issues they created- the Wii U not being a good system especially facing competition from mobile devices.

This time it isn't something of their doing, but rather an issue happening across the world.

Maybe I'm wrong, but that really seems to be the difference in these 2 situations.

 

[ScottSoapbox]

Nintendo can easily absorb it in the revenue from the games. Shareholders can make do with a little less dividend for a certain period.

ROFL! I was going to post about greedy companies refusing to sell things for less than they cost to make! But it's already here.

Why do hate Nintendo's employees? Why should they be lose their jobs because AI companies made RAM so expensive?

Power has gotten more expensive too. Should the big N cut a few more jobs and send checks to all it's customers to cover the Switch recharging costs?

 

[Theinsanegamer]

ROFL! I was going to post about greedy companies refusing to sell things for less than they cost to make! But it's already here.

Why do hate Nintendo's employees? Why should they be lose their jobs because AI companies made RAM so expensive?

Power has gotten more expensive too. Should the big N cut a few more jobs and send checks to all it's customers to cover the Switch recharging costs?

the RAM in the switch cost about $30 before the hype over AI, so that would increase to $42.

 

[Dysnomia]

ROFL! I was going to post about greedy companies refusing to sell things for less than they cost to make! But it's already here.

Why do hate Nintendo's employees? Why should they be lose their jobs because AI companies made RAM so expensive?

Power has gotten more expensive too. Should the big N cut a few more jobs and send checks to all it's customers to cover the Switch recharging costs?

You think it is greedy for a company to charge more for something than it cost to make? That's kind of weird.

Maybe it's sarcasm?

 

[Alsotrue]

...however, they won't because this isn't how the world works.

Just curious why you think they would want to do that? In a public company, every executive would be removed from office if they did that.

Because of price elasticity. An $800 Switch 2 won’t sell particularly well.
Added to that: Less consoles sold means less revenue made from games and services afterwards.
Neither Nintendo nor its customers benefit from exorbitantly expensive consoles.

 

[GhostLegion]

Reply to Dysnomia:
Because of price elasticity. An $850 Switch won’t sell particularly well. Plus: Every console not sold does not generate revenue from games and services. Neither Nintendo nor its consumer benefit from exorbitantly priced consoles.

Don’t bring facts and logic into a battle of ideology. Soooo many people are armchair economists on this site. Not too may have actually taken economics it seems…or remember it if they did.

 

[Dysnomia]

Reply to Dysnomia:
Because of price elasticity. An $850 Switch won’t sell particularly well. Plus: Every console not sold does not generate revenue from games and services. Neither Nintendo nor its consumer benefit from exorbitantly priced consoles.

It won't sell WELL? Well at a loss, it won't sell AT ALL. Because that's (smartly) not what Nintendo does.

The prices going up aren't exorbitant. They are inflation. Demand outstrips supply for memory. Prices go up.

 

[Theinsanegamer]

It won't sell WELL? Well at a loss, it won't sell AT ALL. Because that's (smartly) not what Nintendo does.

The prices going up aren't exorbitant. They are inflation. Demand outstrips supply for memory. Prices go up.

All you've done here is demonstrate you have no idea what you are talking about by confusing shortages and price gouging with "inflation".

Perhaps you have forgotten or ignored the past, but the Switch 2 received a $100 price hike outside Japan purely so Nintendo could make more money. The price of memory per unit has risen $12. So they have tons of free margin toa bsorb the cost without jacking prices up. They also increased the price of their games solely to make more margin, while underfunding their best selling franchise (pokemon).

From a business standpoint, taking a margin hit ont he consoles to keep the juice flowing in the form of game sales is a very viable tactic. Nintendo is the only one that makes a profit per console, but when mario kart is selling 60 million+ copies, even selling the consoles at a $100 loss wouldnt be that bad for their finances.

Like you said,

The prices going up aren't exorbitant

so Nintendo should have no trouble absorbing them instead of gouging their customers for more $$$.

 

[ScottSoapbox]

You think it is greedy for a company to charge more for something than it cost to make? That's kind of weird.

Maybe it's sarcasm?

Maybe? Really?

I started with a ROFL... I asked the OP if Nintendo should send checks to their customers because power prices increased... (Thus drawing attention to the severe flaws in their argument with a parallel in case that part is still not clear)

 

[ScottSoapbox]

Because of price elasticity. An $800 Switch 2 won’t sell particularly well.
Added to that: Less consoles sold means less revenue made from games and services afterwards.
Neither Nintendo nor its customers benefit from exorbitantly expensive consoles.

A $10,000 Switch 2 would sell even worse.

But if we want to talk about what's actually happening here -Nintendo passing on their increased costs to the customer- then we should apply price elasticity to a $500 Switch 2. If Nintendo was paying $100 for 12GB of RAM before (it's likely less in reality) a 41% increase would be $41. Switches cost $450 now.

Will they sell fewer $500 Switches than $450? Yes. Will most of those sales simply be delayed rather than lost? Also, yes. Will it destroy their install base? No.

 

[Dysnomia]

Maybe? Really?

I started with a ROFL... I asked the OP if Nintendo should send checks to their customers because power prices increased... (Thus drawing attention to the severe flaws in their argument with a parallel in case that part is still not clear)

I'm sorry man, just got mixed up on all of the people attacking me. Didn't mean anything by it.