Sounds like they can increase production, but there is then shipping problems.

As I deal with expedited shipping fees with some projects at work, I know they can be insanely expensive. I'm guessing the extra shipping costs that would be associated with increased production, the systems would be selling for a loss and thus they are adverse to doing that.

I feel like I heard this before earlier this year, that to up shipments for a brief time, some Switches were sold at a loss.

They are pretty regularly available in Gamestops in my area now. By that I mean, if you're willing to work the phones, and/or do some driving, you can find one within a day or two.

Yeah the supply has almost met the demand. I had to use an online stock tracker 4-6 weeks after launch to even have the chance of pouncing on one available for online order within 30 seconds of becoming available, or they'd be gone again. Now, the intensity of the search is far less. The supply is only lagging a bit behind now.

At least until the holiday season arrives in full swing =p

well I mean, they can't REALLY reroute EU supply. even in europe its barely meeting demand in the larger countries, and in the smaller ones there arn't enough switches to be worth rerouting anyways. the US is constantly touch and go with supply now, and in japan... well fuck it they are still doing lotteries
if there were enough of a hole in europe to reroute switch supply, ninty already would have.

Sony never expected PS4 to sell so well, Nintendo never expected the Switch to sell so well... wonder how M$ is feeling these days.

The quantities Nintendo needs are small potaotes, game machines don't sell that much (hate it break it to you VGChartz) in the grand scheme of things. 5-6 million more Nintendo Switches for the fiscal year is a piddly little amount of NAND orders, you have 1.5 billion phones alone (this doesn't even count tablets) that will ship this year with NAND flash. 

Cheap little no-name Chinese companies are shipping 5-10 million phones a quarter with NAND flash, an international brand like Nintendo not even being to get 4 million NAND units/quarter is really absurd. 

not if they want to at least not be negative per switch sold...

Well, that might differ from location to location. Here on Rügen there are Switches at virtually every retailer. Not in masses, but you'll find 5-10 units in every store. Granted, we're just an island and have not too many big stores, only one Media Markt on the whole island. But I also was in Stralsund the other day and found more than enough Switches in stores. 

I can imagine that the situation is different in big cities like Berlin or Hamburg. But even if you live there, I'm pretty certain you will find a Switch if you just drive 25 km outside to the next smaller town or something. Or, as you said, just order it online. That's not such an uncommon thing to do nowadays, even in germany where the Internet is "Neuland" according to mother Merkel. =D

But quantities doesn't really matter if there is huge shortage on market, it came to same if you need 5m or 50m, you will hardly find them in any case.

Also it's not point only about NAND memory parts.

http://www.usgamer.net/articles/nintendo-is-facing-off-against-apple-for-switch-hardware-parts

Yet no-name Chinese companies have no problem getting LCDs, and NAND flash, and all of that in quantities that put any game console to shame (some of these guys are shipping 20 million phones a non-holiday quarter Jan-Mar 2017 ... lol, Nintendo and Sony cannot even manage that in a full year). 

IMO, Nintendo does not want to go to other vendors because they didn't make a deal beforehand and would now have to pay a bit more for those parts.

They chose to stick to vendors that are close to Apple thinking they could piggyback off Apple and get cheaper components and their quest for cheap shit has backfired because Apple is asking for more than what Nintendo forsaw.

So for the time being they basically have no choice but to kinda ride this out.