Sources familiar with the matter have revealed that Nintendo Co., Ltd. has significantly reduced production of its Switch 2 console due to sales falling short of expectations during the critical year-end holiday season, with a notably weak performance in the U.S. market.
The sources, who requested anonymity as they were discussing confidential information, indicated that Nintendo now plans to produce 4 million units of its flagship product this quarter. This figure represents a reduction of approximately one-third from the initial target of 6 million units. The production cuts are expected to continue through April.
Since its record-breaking launch in June of last year, sales of the Switch 2 have failed to meet the high expectations set by management. While a lower-priced, non-profitable version of the Switch 2 exclusive to the Japanese market has attracted strong demand, a similar sales performance has not materialized in the United States.
The successful launch of the game "Pokémon Pokopia" had previously spurred a significant rise in Nintendo's stock price. However, management has not used this success as a reason to ramp up console production again. According to the sources, the company is taking a wait-and-see approach, monitoring whether this hit title and other new game releases can sustain consumer interest before deciding on any production increases.
The sources stated that these production cuts are not expected to impact the average analyst forecast for the Switch 2 to achieve sales of approximately 20 million units for the current fiscal year.
Furthermore, the Switch 2 is facing cost pressures, including rising prices for memory chips. Although the increased chip costs had prompted Nintendo to consider raising the console's price, this is not the reason for the current production reduction. The sources confirmed that the cuts are primarily a result of slowing consumer demand.
Following media reports of this news, Nintendo's stock price extended its losses, falling more than 5%.
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