Nintendo Slashes Switch 2 Production Targets Amid Weaker Holiday Demand

Nintendo Co. is significantly scaling back the manufacturing of its Switch 2 gaming console after holiday sales failed to meet internal projections. Sources familiar with the matter indicate the company plans to produce 4 million units this quarter, a notable reduction from the originally planned 6 million. This lowered output rate is expected to continue through April.

Market Reaction and Sales Performance

Following a record-setting launch in June, the $450 device has struggled to maintain momentum, particularly in the US market. While a lower-priced variant has seen success in Japan, American sales have cooled, prompting investor concern. Nintendo shares dropped by as much as 6.3% in Tokyo, marking the steepest intraday decline since early February.

Analysts suggest the production cut reflects a 'hardware shortfall' during a critical sales period. Amir Anvarzadeh of Asymmetric Advisors described the holiday performance as problematic, noting that the software lineup has been lackluster despite recent successes like Pokémon Pokopia.

Software Challenges and Cost Pressures

The sales slowdown coincides with a mixed performance in software. Metroid Prime 4: Beyond, released in December, sold fewer than one million copies—a rare disappointment for a major Nintendo franchise. Conversely, the surprise hit Pokémon Pokopia sold over two million units in four days, though this success has not yet prompted management to reverse production cuts.

Additionally, Nintendo faces rising memory chip costs, a factor contributing to broader electronics manufacturing expenses. While the company has considered raising console prices, the current production adjustment is attributed strictly to consumer demand rather than supply chain costs.

Future Outlook

Despite the current slowdown, Nintendo maintains its target of selling approximately 20 million units for the fiscal year. The company is analyzing whether high initial inventory may have accelerated demand earlier in the year. Looking ahead, Nintendo plans to introduce a battery-replaceable variant in Europe and must navigate potential logistics hurdles and stiff competition from titles like Grand Theft Auto VI slated for release later this year.