Analyst: Wii production costs down 45%

Credit Suisse analyst Koya Tabata tells Financial Times that Nintendo is in a position to cut console's price to stimulate demand.


Nintendo's market-leading Wii holds a significant lead over its competitors in terms of total sales across the globe. As noted in a recent Financial Times report, the Nintendo Wii has sold 8 million units in Japan, easily outpacing the PlayStation 3's 3 million units, despite the fact that both consoles launched within a month of one another in 2006.

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However, as noted by the FT, Wii sales in Japan slipped 63 percent year-over-year in March. And though Nintendo has downplayed its unseating from the top position in Japan during the month--the PS3 outsold it 146,948 units to 99,335--Credit Suisse analyst Koya Tabata believes that the publisher may consider dropping the Wii's price to stimulate demand.

As reported by the FT, Tabata said in a recent note to investors that production costs for the Wii have fallen 45 percent since the console launched more than two years ago. That being the case, Tabata believes that Nintendo has an opportunity to either cut the price of its console to bring in new buyers, or introduce a lower-priced Wii to emerging markets.

However, a Wii price cut would be at odds with Nintendo's decision last month to charge UK retailers an additional £19 ($28) more per wholesale unit, due to fluctuations in currency exchange rates. Speaking to Edge, a Nintendo representative clarified this seeming inconsistency, saying that, "Regardless of the cost price of manufacture, the decision to raise the [Wii's trade] price to retailers in the UK was taken due to the severe depreciation of the pound."

Also speaking to Edge, Screen Digest analyst Ed Barton took exception with Tabata's estimate, saying, "No one outside of Nintendo knows how much the company pays for all its components... It's a reasonable assumption that manufacturing costs have dived a bit, yet the effect of a cut in manufacturing costs hasn't exactly shown up in Nintendo's recent financial results."

Despite record revenues and profits for its first nine months of its current fiscal year, Nintendo said in January that it has revised its full-year earnings estimates down 9 percent to ¥1.82 trillion ($20.2 billion), with net income also seeing a significant rescaling down 33 percent to ¥230 billion ($2.56 billion). The publisher attributed its dramatic revision to the yen's increasing valuation against other world currencies.

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