VideoGameAccountant said:
On the COVID thing, remember we are comparing year end 2022 to 2021. A lot of places were removing restrictions, but others weren't. And there is the fact some people didn't want to go out. However, my point is still the same. 2018/2019 would be more typical years because they don't have some shadow of COVID hanging overhead. On profits, that's fine. I haven't looks recently at their most recent financial releases so I'll take your word on it. My point was on revenue specifically I agree with you on the rest. I doubt there would be much headache if Nintendo purchased the chips and held back on releasing the system, instead opting to build up supply (we can see how it screwed Sony this generation). Unless there is something else in these agreements I'm not familiar with, I wouldn't think that would be a problem. |
The problem would be someone has to pay for those chips, the manufacturing lines, etc. etc. etc. and that someone would be Nintendo.
So yes, they could just sit on millions of mass produced chips for a year for example, but they would also be earning no money on those chips and the sunk cost would likely be high. You're talking about a chip that probably is not going to be that cheap to begin with either, so sitting on millions of them unsold would almost without doubt show up on their yearly financial reports as a massive fiscal year loss that they would also have to explain. No business likes sitting on millions of dollars of unsold inventory.
I don't really see that as a particularly plausible avenue for them. There can be other practical problems there too like they may not be able to say in year 2 "hey we have a ton of chips we hoarded so lets stop/slow production in year 2 since we don't need that much excess chipsets", the problem with that is Nvidia and TSMC (or Samsung) likely have it written that they get royalty fees and a certain number of guaranteed chips every year ... things like that. Which is normal, the chip designer and the manufacturer need to protect their interests too, it's not just about Nintendo being happy.
There's also a lot of other problems with stock piling chips a year+ in advance. You would probably be stuck with a constant pile of inventory made a year before it has to be sold which leads to you not being able to get the best price on the chip because you're in a cycle where you're always selling from inventory that was mass produced a year in the past. There would also be problems if you wanted to do a die shrink but you also have a fat pile of unsold inventory on the previous worse node.
There's just a lot of headaches with this route that I don't think they would want to be put in that position. Or I'll put it another way ... the upside on doing this would have be incredibly enormous, like having a system that's selling maybe 10-12 million units by its 8th year isn't really worth the trouble of doing all this. There would have to be something incredible happening with the ecosystem like the system showing no decline or even increasing in sales somehow or something crazy like that.
The other thing with the COVID pandemic issue is if the point is that the pandemic basically inflated Switch sales, fair enough, but the flipside to that point then basically has to be that with the pandemic restrictions now basically over every where that decline would likely be worse going forward with the pandemic gone. And Nintendo actually does kind of acknowledge this in their last investor QA they cite one reason for the system's decline as being the Switch is having difficulty being seen as a go to entertainment device now that the pandemic is over (basically to that effect) people have more entertainment options. But that doesn't really bode well then for keeping an aging system on the market longer.
Last edited by Soundwave - on 13 March 2023
