Nintendo makes virtually no profit on the Switch.

[GoodBytes]

Japanese tech firm Fomalhaut, a firm who figures out what it costs to manufacture, reports how much the Nintendo Switch costs to produce for Nintendo. Their report involves tearing down the console and analysis every single part cost all by considering the production amounts. All are estimates of course, as we don't know actual deals that Nintendo does with the many manufactures, but their expertise in the field brings us a pretty good idea.

 

 

Based on their analysis the Nintendo Switch cost to manufacture it (part + building it): $257 USD.

 

This excludes:

• R&D cost of the system
• Support
• Warranty coverage cost
• Marketing and advertising (including renting spot for marketing materials in retail stores)
• Any other expense of day to day company operations
• Packaging
• Transport
• and, retailer profit

The system has a MSRP of $299 USD

 

It would seem that the console is sold at cost considering all the extra charges, and the aggressive marketing that the company has been doing with TV and web ads, and even the very costly Super Bowl ads. However, Nintendo CEO, back in Jan 31st said that the console would sales at a small profit on day one, at an investor and shareholder meeting. So the profits are possibly marginal. Maybe just the round up to the nice $299 USD, or they are getting a fantastic deal out of that Nvidia SoC, and/or battery and/or screens which are usually the more costly items in a portable device or Foxconn who builds the system.

 

Quote

According to Japanese tech firm Fomalhaut, who tears down consumer electronics and figures out what it costs to manufacture, and their new report says that Switch manufacturing costs are $257 per console. Nintendo has previously said that it would sell the Switch at profit on day one, and they seem to be making a small profit on each console sold. In addition to the $257 Switch manufacturing cost, there is packaging and transportation, and then the retailers also take a cut of the final price (MSRP is $299).

 

I wish I could read more into it and provide more details of the tear down cost, however the original source is in Japanese, and it seems to be behind a pay wall site.

 

Source 1: http://nintendotoday.com/nintendo-switch-manufacturing-cost/

Source 2: http://nintendotoday.com/nintendo-switch-profit/

 

[yathis]

They will make it on games and accessories.

Like stores and their loss leaders.

[ivan134]

Isn't this typical of all consoles? Sell hardware at a loss and make the profits off software.

[yathis]

1 minute ago, ivan134 said:

Isn't this typical of all consoles? Sell hardware at a loss and make the profits off software.

Printers are similar right, cheap printers and expensive ink.

 

What is typical of Consoles?

Expensive Games!

[Guest lilbman]

Do they really need to?

 

The Switch could've failed and the amount of money wasted would be a small dent in their bank account.

[DocSwag]

3 minutes ago, ivan134 said:

Isn't this typical of all consoles? Sell hardware at a loss and make the profits off software.

BoTW is already pretty much bought by everyone that bought a switch. That's an extra $60 for probably less than $10 in packaging costs.

 

That's not to mention the tons of other games people will buy once they come out.

[WereCat]

11 minutes ago, DocSwag said:

BoTW is already pretty much bought by everyone that bought a switch. That's an extra $60 for probably less than $10 in packaging costs.

 

That's not to mention the tons of other games people will buy once they come out.

 

 

Then there is the Pro Controler.

[aeroencychris]

12 minutes ago, DocSwag said:

BoTW is already pretty much bought by everyone that bought a switch. That's an extra $60 for probably less than $10 in packaging costs.

 

That's not to mention the tons of other games people will buy once they come out.

Not to mention downloadable games becoming popular now so companies don't have to pay anything for manufacturing

[AshleyAshes]

How is this news?  This is normal for almost ALL consoles early in their life cycle.  They're sold under a razors and razor blades model.  The only time this was ever news was with the Wii, which proved to be so cheap to produce that it was actually fairly profitable from launch, breaking from normal console sales schemes.  This on the other hand, is business as normal.

 

All the money is in game and accessory sales.

[Dabombinable]

20 minutes ago, ivan134 said:

Isn't this typical of all consoles? Sell hardware at a loss and make the profits off software.

For the previous good ones yes. The Xbone and PS4 are sold at a profit and thus are poor value when compared to previous ones and contemporary PC.

[imreloadin]

3 minutes ago, cdsboy2000 said:

Not to mention downloadable games becoming popular now so companies don't have to pay anything for manufacturing

And when you're Nintendo you can even steal an emulator to run your roms on...

[Princess Luna]

1 minute ago, AshleyAshes said:

-

It is news because it is the confirmation, before all we had was assumption though I agree this nothing uncommon.

[GoodBytes]

23 minutes ago, yathis said:

They will make it on games and accessories.

Like stores and their loss leaders.

Maybe that explains why the accessories are more expensive.

 

[EunSoo]

I saw an article that said the exact opposite a while ago. Lemme see if I can find it.

[GoodBytes]

22 minutes ago, ivan134 said:

Isn't this typical of all consoles? Sell hardware at a loss and make the profits off software.

Nope. It is more typical that Sony and Microsoft sales their console at a loss, and makes it back from services, software and accessories, but for Nintendo, so sales the console at a nice profit.

[Princess Luna]

Just now, GoodBytes said:

Nope. It is more typical that Sony and Microsoft sales their console at a loss, and makes it back from services, software and accessories, but for Nintendo, so sales the console at a nice profit.

Well I suppose Now it is typical of all consoles

[GoodBytes]

7 minutes ago, cdsboy2000 said:

Not to mention downloadable games becoming popular now so companies don't have to pay anything for manufacturing

and still charges the same price as the physical copies, maximizing profits.

[Misanthrope]

33 minutes ago, yathis said:

They will make it on games and accessories.

Like stores and their loss leaders.

They could, but Sony and Microsoft have been trying for decades and don't do as well as you'd expect. 

[Guest Kloaked]

Wow OP is such a Microsoft shill. He sh- wait wrong thread.

[sgloux3470]

43 minutes ago, ivan134 said:

Isn't this typical of all consoles? Sell hardware at a loss and make the profits off software.

No, not always.

 

Nintendo almost always makes a profit off their hardware. (Which they still are here.)

 

If I remember correctly, the 360 started being manufactured for profit within a year while the PS3 was sold at a loss until like 2011.  (Ps3 was losing like $150-200 a system at launch.)

 

Both PS4 and Xbone are currently sold at a loss as well.

[christianled59]

I can't even find a switch to buy.

[skywake]

35 minutes ago, GoodBytes said:

Maybe that explains why the accessories are more expensive.

No doubt there's a huge margin on accessories but I doubt they're making much more on them than Sony or Microsoft. The Pro Controller is $10AU more than equivalent PS4/XBOne controllers. But in terms of what's in it? When push comes to shove the three controllers are fairly similar in terms of tech except for four main differences. The Switch has gone for a different and more expensive system for force feedback and it has NFC in all of the controllers. And in exchange for that it loses the analogue triggers and headphone jack. I think it's fair to argue whether what we get is worth more to the consumer or not. But I don't think Nintendo's controller would be cheaper to make than their competitors. So that $10 extra probably isn't going to Nintendo.

 

Though they are the only one actually making an effort to have a library of local multiplayer focused games so.....

[Lethalmonk]

34 minutes ago, sgloux3470 said:

No, not always.

 

Nintendo almost always makes a profit off their hardware. (Which they still are here.)

 

If I remember correctly, the 360 started being manufactured for profit within a year while the PS3 was sold at a loss until like 2011.  (Ps3 was losing like $150-200 a system at launch.)

 

Both PS4 and Xbone are currently sold at a loss as well.

ps3 did too, but the games and accesories made it up.

[suicidalfranco]

Still don't think that justifies that a usb-c to hdmi and power dongle should cost 90$

[MakeAMDGreatAgain]

Good. They lied about that nvidia "custom" chip.