Nintendo has told suppliers and assemblers it hopes to make nearly 20 million units of the Switch device in the year ending March 2018, people involved in the discussions said. Though the company’s official sales target for the year is 10 million, strong demand suggests it can sell many more—if it can make them.
The problem is an industrywide capacity shortage for components used in smartphones, computer servers and other digital devices. These include the NAND flash-memory chips that store data, liquid-crystal displays and [Linear Resonant Actuators] the tiny motors that enable the Switch’s hand-held controllers to imitate the feel of an ice cube shaking in a glass.
“Demand for our NAND flash memory has been overwhelmingly greater than supply, and the situation is likely to stay for the rest of this year,” said a spokeswoman at Toshiba Corp., the troubled industrial giant that is leaning on flash memory to survive. She cited demand from smartphone makers—Apple and Chinese companies are among Toshiba’s customers—and data centers.
People in the industry say the rapid expansion of web-based services for corporations has driven demand for computer servers that use flash memory. Continued demand for Apple’s iPhone 7 and a 10th anniversary model of the iPhone expected later this year are also keeping parts makers at full capacity, helping power Japan’s economy to its longest growth streak since 2006.
Nintendo and Apple representatives declined to comment on supply-chain issues.
Analysts say rivals for the sought-after parts can often offer better terms than Nintendo. Makers of data-center servers tend to use newer and higher-margin components, while smartphone makers issue larger orders than Nintendo.
If Nintendo increased spending significantly to secure more parts, that could risk driving the Switch’s production cost above the $299 retail price. President Tatsumi Kimishima, has said he doesn’t want to sell the Switch at a loss.
