Nintendo Faces Switch Shortages -- WSJ

Production of game machine can't keep up with demand from Japanese, U.S. users

This article is being republished as part of our daily reproduction of articles that also appeared in the U.S. print edition of The Wall Street Journal (August 28, 2017).

Nintendo's latest videogame machine, the Nintendo Switch, is winning fans for both its lineup of popular games and its flexibility -- it works as both a living-room console and a hand-held device.

But the real challenge for gamers has been actually getting their hands on it. Production isn't keeping up with demand in Japan, resulting in blockbuster queues and lotteries there. Over weekends in July and early August, tens of thousands of fans lined up at stores for a one-in-10 chance to buy the $300 console at events that have become a form of entertainment.

In the U.S. too, scarcity has only made the Switch more sought after. Some fans have spent months trying to find a Switch, and sellers on are getting $380 or more for a unit. Wal-Mart Stores Inc., Target Corp. and GameStop Corp. said they have struggled to meet demand both in stores and online.

"We continue to see strong demand for the Switch and sell out our inventory in a matter of days of it being available in our stores and our websites," Tony Bartel, GameStop chief operating officer, said in a quarterly earnings call Thursday. "We believe that this will continue through the holiday."

Supply in Europe seems somewhat better, with electronics retailers' websites in France, Germany and Italy showing the console is available. In June, though, British videogame retailer Game Digital PLC issued a profit warning partly blaming lower-than-expected Switch supplies to the U.K.

Nintendo's official target is to ship 10 million Switch units in its current fiscal year ending in March 2018. People involved in the supply chain say they have been told to prepare for 18 million units. One executive in the supply chain said his company was ready to pick up the pace of production if asked.

"We're doing everything we can to make sure everyone who wants to buy a Nintendo Switch system can do so," Nintendo said in a statement. "We will ramp up production for the holiday period, which has been factored into our forecast."

One delicate balance for Nintendo: The more it tries to boost output quickly, the more it has to bow to the terms of parts makers, some of whom are also busy with orders for Apple Inc.'s next iPhone.

Nintendo's stock price is up more than 50% since the Switch went on sale March 3, giving the company a market capitalization of more than $45 billion.The scarcity of the Switch -- whether by design or not -- adds to the hype.

Aki Natsume, a 26-year-old singer, was one of more than 2,000 people a few weeks ago standing in line at the large Bic Camera store in Tokyo's Akihabara district for a chance to buy the Switch. She was there with a friend to make a video for YouTube about the hunt; she said her friend's YouTube channel has done well with clips of people trying to buy the machine.

Ms. Natsume got lucky -- her number was one of 200 selected in the lottery. She bought a Switch, even though she said she wasn't particularly passionate about it. She already owns a rival console from Sony Corp. "I'm busy with playing a PlayStation 4 game."

Jimmy Niemczura, a 26-year-old in Youngstown, Ohio, said he nabbed one of only two Switch machines he saw for sale at his local Wal-Mart on July 31. Ever since March, he had been visiting major retailers near his home at least once a week without success. He said he signed up with several stores to be notified by email when new units arrived, but hadn't heard from any. "It was pretty frustrating," he said.

Earlier this month in Japan, electronics retailer Yamada Denki Co. apologized after acknowledging that a few of its salespeople were making what it called inappropriate demands on would-be Switch buyers: The customers were told that to get a Switch they had to buy a wireless router at the same time. The retailer said it has halted the practice.

Japan is Nintendo's second-largest market by revenue, accounting for 26% of sales. Nintendo sold more than 294,000 Switch units there in July, up from 129,971 in June, according to videogame publication Famitsu.

In Nintendo's Americas market, its largest, accounting for 43% of revenue, the company sold approximately 220,000 Switch consoles in July, up from about 215,000 in June, according to NPD Group.

People familiar with the supply chain say Nintendo is making progress working through shortages of key components, such as flash-memory chips and batteries. And it has overcome many of the challenges in assembling the machine's detachable, wireless controllers, which pack sensors and other delicate components into a small space. As a result, more players are making it to shelves, especially in Japan where Nintendo released the popular game "Splatoon 2" for the Switch in July.

(END) Dow Jones Newswires

August 28, 2017 02:47 ET (06:47 GMT)