While 2022's already great lineup will definitely ease the slope, I don't see any way next year will come close to 2020 or 2021 in terms of hardware sales when the Switch will be 5+ years old, and over 100 million people will already have one. (23 million in Japan, which is around 1/5th of the total population)

It's only natural that an older and popular system will eventually start to see both market saturation and diminishing returns in terms of hardware boosts from major software.

Don't get me wrong, Switch will probably have one of the best selling 6th years of any system in history, but it can't go up and up forever. Even the most popular platforms slow down eventually.

Depending on what you mean on the decline but saturation might not come into play in 2022. Reasons being looking at 3DS year 5-7, excluding OLED sales, NSW is matching 3ds year5+6 combine currently despite being 2mil+ ahead launch aligned.

Now for OLED, it’s a model where the first 10mil consumers or so want an upgrade from their 2017/2018 purchase (or even 2019/2020). The only relevant system currently in japan are both the NSW and the ps5. No explanation on ps5, NSW is the system that is getting all the attention due to software/etc. combine this with people wanting to buy a new product on the hardware side and it’s obvious OLED is just that.

like 2020/2021, people are underestimating NSW and the circumstances that is current day japan. Population don’t mean much. Pokémon RG sold 8.22mil and that was said to never be repeated yet we have ACNH with 9.5mil on a 21mil installbase with it possibly reaching 12mil lifetime for example

There comes a point though where most of the people who would buy one already have one. DS and 3DS saw multiple refreshes that had existing buyers replacing their old systems, but even they eventually slowed. Switch cannot go on growing eternally.

I'm not talking about a cliff, but an eventual decline is a factual inevitability, and I just can't see 2022 selling on par with 2020 and 2021 given the age and install base Switch will have by then.

It doesn't have to sell on par with those years though those two years are among the best years for any platform a decline from 2021 is still a solid performance which is the point as one solid performance puts the platform very much in range of the top selling platforms.

My crazy predictions 

2021 - hardware peaked - 6.6M( or supply constrain, and no hardware peaked - 5.9M)

2022 - software sales peaked, slow hardware down ( -15%-20%), new hardware (Oled Switch light and Switch +) - 5.61-5.28M

2023 - hardware YOY down ( minus  20%) - software sales down (15%)- slash the price of the hardware ( -50 bucks) - 4.48-4.22M

2024 - New hardware ( switch 2) - Switch hardware down ( minus 30%) - 3.13-2.95M 

2025 - lowest hardware sales ( 40% down) - 1.88-1.76M

2026 - 50% YOY Down - 0.99-0.88M

2027 - Limbo area now - 0.4-0.3M 

2028 - Discontinuation and end production. 

5.9M would still be hardware peak the way famitsu counts it.

Indirect lol? Then what exactly is the Switch a direct successor to?

The Wii U.

So.. when are you expecting a direct successor to the 3DS?

Never. We already have an indirect successor in the Switch that sold well.

The Wii U stopped all production when the Switch was announced, while the 3DS continued as normal. A lot of 3DS games stayed exclusive while all Wii U games got converted to Switch.