Nintendo Increases Switch 2 Price Amid Memory Chip Crunch, Predicts Sales Drop

Nintendo is adjusting the price tag on its Switch 2 console in response to supply chain challenges, notably the soaring costs of memory chips. The new price in the U.S. will be $499.99, up $50 from the original $449.99, effective September 1. This marks a strategic shift as the company grapples with increased component expenses.

The memory crunch, driven by a surge in demand from AI data centers worldwide, has pushed up prices and forced Nintendo's hand, following similar moves by competitors like Sony, which bumped PlayStation 5 prices earlier this year by up to $150. Nintendo is extending price hikes to other regions as well, including Canada, Europe, and its home market of Japan where the price rise will take effect from May 25.

On the sales front, Nintendo has lowered its expectations. The forecast for Switch 2 units shipped in the fiscal year ending March 31, 2027, is set at 16.5 million, down from nearly 20 million the previous year. This outlook missed analyst estimates by a large margin, signaling headwinds for the once booming console.

Financially, Nintendo foresees the impact of rising component costs and tariffs to shave about 100 billion yen (roughly $638 million) off its earnings. The company now projects net sales to drop by over 11% year-over-year to 2.05 trillion yen, while net profits are expected to fall 27% to 310 billion yen, also below street forecasts.

The price surge and sales downgrade have weighed heavily on Nintendo's stock, which has fallen around 50% from its record high achieved last August. Market watchers note this downturn is unusual since second-year console sales generally rise rather than decline.

Despite these setbacks, Nintendo's iconic IPs continue to shine. The recent "Super Mario Galaxy" movie has nearly hit $900 million globally, and the Switch 2 exclusive "Pokémon Pokopia" has become one of the system's best-sellers. Upcoming installments in the "Splatoon" and "Starfox" franchises are due this year, with major Pokémon titles lined up next year.

Industry analysts point to the heightened urgency for Nintendo to unleash blockbuster titles quickly to revitalize Switch 2 sales. The console's initial launch was met with fanfare last June, but the memory supply issues have since cast a shadow on the momentum.

Nintendo's first-quarter report revealed revenue slightly below expectations but managed a net profit that topped estimates. Whether these early signs indicate resilience or just a brief reprieve remains to be seen as the company navigates these pricing and supply hurdles.