Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Nintendo is set to catapult its long-awaited Switch 2 games console into the teeth of a global trade war, betting a reshaped supply chain can help it overcome the impact of US tariffs and that a built-up machine can match the runaway success of its predecessor.
Eagerly anticipated for years by console fans, Nintendo is expected to unveil the key details about its new gaming machine on April 2 — dubbed “liberation day” by Donald Trump, who intends to announce “reciprocal tariffs” on trading partners at the same time. One pivotal selling point could be deeply affected by whatever the US president decides to do: the Switch 2’s US launch price.
The original Switch revolutionised gaming when it was released in March 2017 as the world’s first hybrid of a handheld and home console. It propelled Nintendo’s share price to new heights as it sold more than 150mn units by the end of last year.
Now, the company behind famous game characters Mario and Zelda is counting on converting that massive, dedicated fan base into customers for a more powerful Switch 2 with a larger display and for the must-have line-up of next-generation games that will accompany it.
But behind all the showmanship and slick presentations expected next Wednesday, the company’s strategy is underpinned by a more prosaic but material shift in its supply chains that could end up being just as critical to its success as the console’s new technology.
The Japanese company has been shifting production away from China since the first Trump administration signalled its intent to upend the global trading system. Now, according to analysts and import data, more than half of Nintendo’s hardware imported into the US is from Vietnam and Cambodia.
Robin Zhu, an analyst at Bernstein, said: “The ramp-up of new assembly capacity in south-east Asia could be critical for their efforts to ensure adequate supply over the 2025 holiday season and therefore the success of the Switch 2 this year.”
Hundreds of thousands of Switch 2 devices have been sent from Vietnam to the company’s US facilities since the start of the year, said people familiar with the matter and analysts who have crunched the data.
Nintendo declined to comment.
David Gibson, an analyst at MST Financial, said: “Export data combined with finished product codes confirms that Nintendo shipped finished Switch 2 [from Vietnam] across five days in January for a total of 383,000 units with all of them going to the USA.”
“I suspect this occurred to test the distribution system and get ahead of the risk of tariffs. I expect the numbers to have ramped-up significantly in February and March.”
Other data series showing the volume of imports to the US by Nintendo by weight — but not by product — support Gibson’s thesis. They show a continued increase in volumes from Vietnam in March, when they made up 60 per cent of its shipments to the US.
Nintendo is not alone in stockpiling in the US ahead of new tariffs, with PlayStation maker Sony also amassing inventory. But the Kyoto-based company is considered one of the most exposed companies to Trump’s policies, due to the impending Switch 2 launch.
Despite the uncertainty, Nintendo’s share price has risen nearly 25 per cent this year, including a 5.3 per cent rise on Wednesday after Goldman Sachs issued a “buy” rating and said they expected it to aim for shipments of 10mn units in the first year.
However, its analysts warned “price is one of the important factors that affects the penetration rate of the hardware and will be closely watched”.
Planned extra capacity at Nintendo’s suppliers outside China will help cushion trade-war risks, with crucial contract manufacturers expected to have their expansion work completed in Vietnam and Cambodia this year, say analysts.
Whether Nintendo’s bet pays off depends, in part, on how long Vietnam, in particular, can avoid being targeted by Trump’s tariffs. It has the third-largest trade surplus globally with the US.
Some analysts predict Nintendo’s strategy will be simply to set a price and adapt based on whatever tariffs materialise, something they believe customers will accept given the strong pent-up demand for the Switch 2.
Others, including Gibson at MST, say the company could set a price that includes a margin for potential changes in the duties imposed on Vietnamese imports. He argued that — because the Vietnam export data lists the Switch 2 unit price for custom duties as $338 — “the final price will be $399 not including a game”, but including a buffer.
The original Switch console launched in the US eight years ago with a retail price almost $100 cheaper than that — at $299.99.
Read the full article here
