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Recent news has pointed out two Nintendo Switch (NS) features that are causing a stir among gaming consumers. 

 

  • NS to have 32GB built in storage (possibly 64GB)
  • NS support up to 128GB SD Cards
  • NS will not support external HDDs
These reports come from Emily of Twitter fame who while having some misses and wins, has been stellar and perfect with NS thus far. Additionally, others have supported that these are in fact correct based off of dev kits. So, let's assume this is fact and move on with the discussion.
Bluray vs SD Card

As I was updating a game on my Xbox One last night I was reminded of how irritating the current gen's game architecture is designed. Due to the limitations of Bluray (no read/write, data transfer speeds, etc) we are forced to download entire games and all of their patches to a HDD regardless if we have the physical disc or not. This is bullshit and basically forces me to want to buy only digital so that I can atleast gain the ease of use vs having to get up and put in a disc.
SD card or cart based games removes these problems. NS game carts are easily as large or larger than any Bluray. So discussions on storage limitations are very silly for game media is very silly. Carts are also many times faster at transfering data than a disc. There is no technical reason why a game cannot be played directly from the cart/card. No need to ever pre-load some data to the HDD and likely no time wasting cut scenes. Lastly, devs could potentially write game updates directly to the game card. Though basing this principle on how 3DS has worked, I think this is likely not going to happen.
What this means is that the simple differences in data transfer speens alleviates the need to download massive amounts of the game to be played properly. Removing one big reason current gen eats up so much HDD space.
Cart/SD Card is just a better solution in every way.
3DS supported much larger than suggested

Its widely known that the 3DS recommend size (up to 32GB) was just Nintendo being Nintendo. People actually put 128GB cards in without issue. This highly suggests that Nintendo will report a size they recommend but you will be able to use larger. Additionally, Nintendo increased the size capacity via software at one point as well. I'd expect Nintendo to do same if they feel there is a need.
SD Cards - I can haz many.

While this has an associated cost, if you choose to go digital, you can likely fit 2~3 full games on a single 128GB SD card which costs ~$40 or less. Yes, having to change out a SD card is worse than only digital. However, this flexibility allows me to buy what fits my usage. 
NS is home and portable console

Having the ability to add a HDD or having one in the dock simply does not make sense. Assume you're mid-game and you want to take the console with you. How would the game, installed on an external HDD, be taken with you? Would you need to wait for it to copy to SD card? Would you carry an ext drive with you?
Nintendo wanted to introduce home console gaming anywhere and everywhere with simplicity. The trade-off was to focus all storage expansion to SD Cards vs HDDs. SD cards are more flexible, more portable, use less power, more durable, faster data transfer and when compared to SSD, cheaper. 
Conclusion

The only benefit Xbox/PS can claim is that you get at least 500GB for digital usage out the gate. But, that is only required due to limitations on Bluray that are removed when using a cart based medium. NS is providing the most flexible and best gaming experience by focusing on flash based memory/media vs slower discs and HDDs. As much as people clamour on about SSD vs HDD, you'd think they'd be drooling over the concept of a cart based game backed up by SD cards for storage. You can keep your slow and needlessly bloated game experience, I'll live in the fast lane with next gen mediums.

 

 

EDIT: http://en-americas-support.nintendo.com/app/answers/detail/a_id/274/~/what-sd-cards-and-microsd-cards-are-compatible%3F

Apparently I was not up-to-date on my 3DS knowledge. They don't have a max limit on supported SD cards. With that, I think it is likely that only initial dev kits had some limitation and the production version will support whatever it is you throw at it. So go ahead and buy a 512GB SD card if you feel you need.