• Fri. May 12th, 2023

OLED model expected to attract new customers, but falls short of hopes

Jul 7, 2021

TOKYO — Avid gamers were disappointed when Nintendo unveiled the latest version of its popular Switch console on Tuesday.
They had been hoping for a “Switch Pro” — a long-rumored high-spec device that would be capable of competing with the likes of Sony Group’s PlayStation. What they got was a device aimed squarely at casual and first-time gamers.
The most notable upgrade is the display, a 7-inch, organic light-emitting diode display (OLED) that replaces the 6.2-inch liquid-crystal display of the original. Other improvements include wired internet connection, better speakers and more internal memory. And at 37,980 yen ($342), it is only 15% more expensive than the first edition.
Missing, however, are more substantial improvements such as more powerful chips and 4K TV output.
“There are no substantial improvements this time in the main unit specifications,” Kenji Fukuyama, an analyst at UBS Securities in Tokyo, said of the new model.
The coronavirus pandemic has driven a surge in sales of the original Switch, released in 2017, and the smaller, cheaper Switch Lite, which came out in 2019. Both models have helped win over casual gamers, and analysts expect the new version will sustain that sales momentum — but without making much of a splash.
Hideki Yasuda, an analyst at Ace Research Institute, said the new OLED version could draw in casual gamers, and possibly prompt Switch Lite users to upgrade their consoles, but that “gamers who focus on the specifications of the hardware have been let down.”
Citigroup analyst Kota Ezawa wrote in a report that “the new version is insufficiently distinct from the current one, as it will not be able to handle 4K visuals.” He added, “The new OLED Switch falls somewhat short of our expectations and we remain of the view that it will not be a big hit.”
Investors also seemed unimpressed. Shares in Nintendo ended the day flat in Tokyo on Wednesday.
Nintendo fans and analysts still anticipate a Switch Pro, but a global chip shortage means such a launch may come later rather than sooner. “I believe there is still a Switch Pro coming but for certain reasons, likely including the chip crunch, Nintendo has been unable to release it,” said Ace Research’s Yasuda.
Nintendo has acknowledged that the unprecedented shortage of chips has already affected its production.
In May, Nintendo President Shuntaro Furukawa said, “The global chip shortage means we are not in a position to produce all the products we want. … We are making every effort to produce as much as possible, but there is more uncertainty surrounding our production plan than in previous years.”
The global chip crunch has wreaked havoc on everything from PCs and gaming consoles to cars and air conditioners.
Nintendo’s Japanese rival Sony has faced production trouble with its next-generation PlayStation 5 console, which was released in November. The conglomerate has been struggling to meet demand as it remains under tight supply constraints.
The Financial Times has reported that the chip crunch could also impact OLED products as chip suppliers like Samsung Electronics and TSMC face overwhelming demand.
Game developers enjoyed a boost in sales last year as demand for home entertainment rose during the initial phases of the coronavirus outbreak, which kept people at home and under lockdown.
However, as inoculations pick up in certain countries, more people are emerging from their COVID hibernation.
In a report this month, Dutch research specialist Newzoo forecast the global gaming market to generate $175.8 billion in 2021, down 1.1% on the year, with the console and PC markets forecast to decline the most. The chip shortage and delays in game development will also affect companies, the report said.
Nintendo expects Switch sales to drop 12% this fiscal year, guidance that likely has already factored in its outlook for the OLED model.
Daniel Ahmad, a senior analyst at Niko Partners, tweeted that the OLED version aims to “sustain overall demand over the next year and strengthen the pitch for Switch as a premium console worthy of its price point.”
The original Switch and Switch Lite have sold a combined 84 million units so far, and Nintendo expects to sell a further 25.5 million units for the year through March 2022. That would bring total sales to over 100 million units, overtaking the Wii to become the company’s bestselling home console.