Nintendo moves production to Southeast Asia as its updated Switch models reportedly move forward.
It's been more than two years since the launch of the Nintendo Switch, and the company has yet to publicly discuss plans for new revisions of the hardware. We know from previous reports that two new Nintendo Switch models could be on the way, possibly as soon as this year. Earlier this year, Nintendo said it would not announce the new systems during E3, and that indeed turned out to be the case, with last week's Nintendo Direct focusing exclusively on software. But a new report from The Wall Street Journal published during E3 2019 reveals some new details these rumored new Switch models.
Specifically, the report states that Nintendo has decided to move the manufacturing of the new consoles to Southeast Asia instead of China. This is a result of concerns about potential United States tariffs on electronics made in China. As we reported previously, President Trump's proposed import tax rate of 25 percent would impact video game consoles, as well as smartphones and computers. In theory, this could lead to price increases on game consoles--from Nintendo, as well as Microsoft and Sony--as companies pass on the cost to consumers.
The alternative would be to absorb the cost themselves, which is obviously not a welcome concept for companies. Game consoles are not historically where the money is made in the games business. Oftentimes, systems are sold at a loss or with very thin margins, with profits instead coming from software and services. Those margins do improve over time, but a 25% tariff would nonetheless be unwelcome.
Should the 25 percent tariff go into effect for Switch consoles shipped into the United States, that would impact how much money Nintendo--and other companies--make on console sales. Nintendo has been the outlier in this area, however, as the company maintained from day one of Switch sales in 2017 that it makes money on each console sold.
If the 25 percent tariff goes into effect, that could cut into the Switch's profit profile, which is likely why Nintendo has elected to move production of the console outside of China.
According to WSJ's report, Nintendo has already moved production of the existing Switch model, as well as the two new rumored ones, to Southeast Asia. Regarding the new systems, one is said to have a similar form factor to the existing model but feature better components, with the other expected to have a different look and lower specs that make it less expensive. Given the systems are now reportedly in production, they could release soon, WSJ said. A WSJ report earlier this year said a new Switch could release by the end of June, but there's been no indication of that happening. With the end of the month in sight, that possibility seems exceedingly unlikely.
Nintendo declined to comment on the report when approached by WSJ.
It's unclear when Nintendo may announce the new Switch models, if they are indeed real. With no new hardware to discuss during its Direct conference this week, Nintendo made a series of software announcements, including The Witcher 3 for Nintendo Switch and a sequel to The Legend of Zelda: Breath of the Wild.
Nintendo has a long history of offering revised models of its gaming hardware, particularly on the handheld side. The rumored new systems would not be a new generation of Switch hardware, but merely enhanced or refined versions of what's already on the market.