Don't forget that Nintendo intends to have the chip as cheap as possible, the longer they wait for releasing a console with this T239 chip, the cheaper it will be. If the costs won't get lower this year, they'll wait until next year

When denouncing an argument, you should refrain from making up numbers. Because otherwise it looks like you have no idea what you are talking about.

In the previous year (ending March 2022) Nintendo's revenue was down by 3.6%, this year it's down by 1.9% by the end of December and projected to be down for the full year by ~4%.

When it comes to operating profit, it was down by 7.5% in the fiscal year ending March 2022, this year it's down by 13.1% through nine months and projected to be down for the full year by ~20%. Well, would you look at that, the figures for operating profit are quite close to what you passed off as revenue. What a rookie mistake to make.

The next error you made is that you pretended that the war in Ukraine didn't have a massive effect on the profitability on companies during the past twelve months. Nintendo isn't in an industry that benefits from the crisis (unlike energy companies who increased their margins), so the rising fixed costs for employees did cost them.

Besides, launching new hardware is a huge undertaking. It's not a period where the profitability of a company increases, unless there's an extreme situation like the total failure that the Wii U was. Succeeding a successful platform is a very different matter and the last time Nintendo had to (DS and Wii), they rushed both successors to the market which turned declining profitability of the company as a whole into outright losses.

And forgive me if I LOL at your opening paragraph. As if any third party publisher would ever make such a big upfront investment in new Nintendo hardware that it could hurt themselves.

...

Anyway, perhaps Nintendo will really go ahead and launch Switch's successor in March 2024 like the leaker suggests. That in turn would likely mean that they'll let Switch wind down without taking the full range of options to prolong its life. Or they plan to launch a rather expensive successor ($400+) and treat Switch like they treated the 3DS when it was succeeded by Switch: A low-priced option for Nintendo software that continues to see new B and C tier first party games for a couple of years. I mean, the question how Nintendo will handle the transition still lacks any good clues for an answer.

It depends for what time period the chip was contracted for, but Nintendo may be on the hook for payments starting even this year if the contract was for Nintendo to start using the chip in 2023 or 2024 (lets say).

They may owe Nvidia royalty fees and/or just full stop payment for the R&D on the chip now or soon. So if they don't have any money coming in for the chip, it's  could incur a loss for them. There's also likely contracts for the chip manufacturing and fabs done beforehand so Nintendo likely is on the hook for having booked fab/production lines, they can't just say "well turns out we don't need that" likely without a penalty cost.

Nvidia didn't make the chip for fun as a hobby, its development is likely tied to Nintendo giving them a contracted guarantee of royalty payments per year starting on a certain year on top of probably some lump sum amount for just the development of the chip on top of that. 

Think of it more like this ... say you own a successful cafe and now and 1 year ago you signed a lease to expand to a 2nd location and also have already ordered the equipment for the 2nd location (coffee machines, stools, tables, etc.) and all the construction inside is mostly finished too. Well even if you decide for whatever reason you want to delay the opening of the 2nd cafe, you're still on the hook for the monthly rent the 2nd location has, someone has to pay for the all the machines, equipment, and someone has to pay for the construction of the new location too. Just because you say "well, maybe we'd just like to focus on the 1 location for another year" it doesn't mean those other costs vanish. 

2025 is still certainly possible. People keep comparing the Switch to previous Nintendo consoles when it comes to their lifespan and release. However, the problem with that is that the Switch is a major anomaly compared to the previous Nintendo consoles. The Switch is the most profitable console of all time with software that's selling far better than any previous Nintendo console, so the lifecycle pattern that we've seen with previous Nintendo systems may not apply to the Switch.

While yes sales are dropping for the Switch, the profits are still extremely good for Nintendo and when we compare this fiscal year's profits for Nintendo to the DS's 6th year, FY ending 2023 would have an operating profit of 3.55B compared to 1.5B for the FY ending 2011. Profits for the switch's 6th year are 137% higher than the DS's 6th year. Also, Nintendo this fiscal year would see a 24% drop YOY in operating profit compared to the DS which saw a 52% drop YOY. So Nintendo has much less of a reason to panic and release a successor early this time around like the DS.

Releasing a new console should never be done in a state of panic to begin with, if you let your business collapse or decline that sharply that you desperately need a new console, your management has fucked up royally to begin with. 

Like Sony was also making large profits with the PS4 right up until it's final year, but they still went ahead with PS5 because they know every generation has to end at some point. 

This whole obsession with "milk a console dry to the bone to the point where you're in a really dire state of decline" is not really something that should be applauded. It's a stupid strategy. Your existing console should be in a state of gentle, natural decline when its replaced (like PS4 was for example, like Super NES was), not in a "holy shit, this thing is totally cratering" type of thing. 

Especially when it's your only console and you don't have a secondary hardware line any longer to bounce back off of. 

Once your console is past 5 1/2 years old and starting to show YoY declines in the 20-30% YoY range it's probably a not very subtle sign that it's time to start moving ahead with the generational transition, that's not a situation that's going to magically get better for you the longer you wait, it's more probable to only get worse.

First, to Rol and other's points, we shouldn't trust the "insiders". Almost everyone and their mother said a Switch Pro was happening and in the end, it didn't. Digital Foundry as claimed that plans change, but is that true or is it just saving face. Even now, Andy Robinson claimed that the rest of 2023 was light for Switch, but then back peddled and claimed "Oh they are later in the year."

New Switch is probably coming. There is enough signals out there to say it's happening, just not when. I'm confident we wont see a new Switch until Early 2024. That would put the Switch at 7 years old on the dot. Latest would be March 2025, but it will probably be in 2024. 

As for the idea that "They don't need to sell Switch 2 because of strong sales", I think you could argue that's a great time to release. Nintendo is clearly worried about the transition, so if the Switch is still doing well, they could potential gear "Switch 2" as "Switch Plus" and support the old system. Nintendo did this with the GBA ("third pillar") and the 3DS (it got Nintendo made games through 2018). I expect early titles for the system will be playable on both and then come the first holiday, they'll have exclusive titles. Something like the 3D Mario or the next Smash will be exclusive to Switch 2.

Declining compared to what? That measure is only Year over Year, but the decline in sales is likely due to the loss of the COVID boost. You'd have to compare sales to 2019/2018 to really get a good gauge on how they are doing. So I don't think declining sales by itself isn't a reason to have a new system. Also, it doesn't speak to the profitability of the system. Components for this thing are cheap and they have a lot of software on it. Nintendo is probably making more money on Switches, especially as they've never had to lower the price (if fact they could probably consider raising it based on what Sony and Microsoft are doing). In totality, maybe, but on it's own declining revenue is hardly a factor.

Also, no, there is no world in which they get sued for unnecessary delays.

COVID measures were largely scrapped by this point a year ago (unless you live in China, but China is not an especially large market for Nintendo), can't use the COVID boost thing as a cover forever. Movie theaters were open, airlines were flying again, bars open again, sports stadiums had let people back in, etc. etc. by this time last year. 

If the system is still showing YoY declines north of 20% at this point it likely is an issue of age related product saturation. I would expect a boost in April with TOTK and the Mario movie but in the bigger picture if that's the general trend, it is what it is. 

It's not like net profit is a secret either you can see decline in their profit margins year over year too, they have to disclose that to share holders. Revenue is only piece of the puzzle. 

They wouldn't get sued for a delay (unless they are a egregiously unprofessional), but they could be very easily on the hook to have to pay for chip development/royalty fees. Contracts are designed to protect the chip maker too, otherwise a vendor like Nintendo could have a company like Nvidia spend hundreds of millions or billions making a chip and then just keep saying "well, actually we don't need it now, wait till next year", I'm sure chip makers/vendors protect themselves (ie: probably Nvidia gets guaranteed yearly royalty cut from a chip they deliver to Nintendo that has to be paid whether Nintendo releases the system, makes money on the system, etc. etc. etc. that's Nintendo's problem, not Nvidias). 

There likely are penalties for booking fab lines (which have to be booked way in advance these days given component crunches) too and then just not showing up with a product. If I'm in charge of running a fab and you booked up production lines and then show up with nothing, you've fucked me over because it's not like I can turn around and find a vendor for that production at the drop of a hat. At best if you did this and you went crawling back to TSMC or whoever when you finally decide to make your product, if I'm TSMC I'm saying "well you know what you go to the very end of the line and there's no guarantee we give you this price or this production amount anymore" and frankly like what can you even say to argue that. 

Sitting on a completed chip that cost a lot of money to make is simply a bad idea for a number of reasons. There's very little chance you can sit there and just have other companies shoulder all the cost of a delay and not take a hit yourself when you are the one that ordered the chip, pretty sure an Nvidia and TSMC for example are smart enough to protect their own interests and not just get stuck paying the tab for 1-2 extra years or having a negative impact on their business because a company decided to get cute at the tail end of a product cycle. 

Nvidia especially is notoriously anal about getting their cut and getting paid, I know MS and Sony tried in the past (OG XBox and PS3) to get them to compromise on certain aspects of their contract and they were met with a pretty swift "fuck off, our deal is the deal" from Nvidia which is in large part why Sony and MS only use AMD these days. TSMC probably not smart to fuck with them either, production lines are in short supply if Nintendo has some quantity booked (probably through Nvidia) probably not a smart decision to throw that away. 

Yeah looking at calendar year shipments it looks like a successor next year makes a lot of sense.

2017-14.86m

2018-17.41m (+17%)

2019-20.21m (+16%)

2020-27.39m (+35%)

2021-23.67m (-14%)

2022-19.01m (-20%)

2023-~14-15m (~-25%)

Based on the current trajectory, even without a successor, Switch will probably sell somewhere around what it sold in its launch year and next year will be its worst sales year by a comfortable margin. Like you said, there is no reason to wait until the console is on its death bed before replacing it.

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. 

Damn… well, a thorough ass kicking is an thorough ass kicking. I got nothing other than I hand it to you.

No excuses on my part.