(Bloomberg) – Nintendo Co. has added Sharp Corp. as the assembler of its Switch console, according to people directly involved in the case, as it works to stabilize production and protect itself against trade tensions between the United States and China.
The video game giant has struggled to produce enough units for most of this year as hit game Animal Crossing: New Horizons and stranded consumers at home fueled demand. As the coronavirus outbreak quickly took a toll on production, Nintendo chairman Shuntaro Furukawa said this month that production had returned to normal and the Switch was now made in Malaysia, in addition to the sites. existing in China and Vietnam.
Read more: Nintendo climbs after increasing game demand forecast by 50%
This Malaysian factory is owned by Sharp, said the people, who asked not to be identified because the information is not public. Nintendo’s main assembly partner, Foxconn Technology Co., a key unit of Foxconn Technology Group, owns a stake in Sharp and has helped connect the two Japanese companies, they added. Sharp continues to operate separately from its Taiwanese owner and its stock will be added to the Nikkei 225 Stock Average next week after a four-year absence.
Shares of Sharp rose 2.8% on Thursday, outperforming the benchmark TOPIX and reaching their highest level since February, while Nintendo was up 3.5%.
Nintendo asked Foxconn Tech during the Trump era to provide alternative manufacturing sites outside of China to protect against the trade war, one of the people said, and the company ended up directing some Switch orders to Sharp because the Japanese company had additional capacity in Malaysia. . The production volume at the Southeast Asian site is limited, the person said.
Nintendo’s Furukawa said these assembly lines are not yet operating at full capacity, and the first batch of them is set to hit store shelves soon.
A representative for Sharp declined to comment, while a Nintendo spokesperson declined to confirm details beyond the president’s previous public comments.
Switch assemblers plan to operate at maximum capacity through the end of this year, avoiding the typical December lull that follows holiday demand satisfaction. This suggests that Nintendo, in the current quarter, could end up shipping more than the 10.8 million Switch units it managed during the October to December period of last year.
Read more: Nintendo announced a 20% increase in switch production
Nintendo has diversified its supply chain since before the Covid-19 era, and its chief said at this month’s press conference that adding Malaysia was part of the effort. Osaka-based Sharp has worked with Nintendo before, having once assembled the Famicom console and later supplied key components for the 3DS handheld device. The bulk of Switch production continues to be handled by Foxconn Tech in China.
Switch sales momentum continued in October, according to the Nintendo president, and the much-anticipated debut of new consoles from Sony Corp. and Microsoft Corp. in November were marred by very limited supplies on launch day. Nintendo expected to raise its fiscal year sales target to current $ 24million when its next quarterly results release David Gibson, chief investment advisor at Astris Advisory Japan, forecasting total revenue of $ 26.4 million for the period ending March 31.
Read more: Sony and Microsoft consoles battle light stock on launch day
Released in 2017, the Switch sold 68.3 million units as of September 30, and its lifetime sales are on track to surpass 100 million units. The company has expressed confidence in the beefed up game lineup it has in store for 2021. Bloomberg News also reported that Nintendo is planning an upgraded hardware overhaul, likely with 4K graphics support, to help extend the release cycle. Switch life.
Read more: Nintendo plans new Switch games, extending console lifecycle
(Updates with market reaction to fourth paragraph)
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