Nintendo will raise the U.S. price of its Switch 2 console by $50 to $499.99 starting September 1, forecasting a decline in sales as the global memory chip crunch squeezes profitability for the Japanese gaming giant.
"Price changes will be determined comprehensively, taking into account not only profitability but also the adoption of the platform, sales trends and market conditions,” Nintendo president Shuntaro Furukawa said in a statement regarding the company's pricing strategy.
The company announced Friday it expects to sell 16.5 million Switch 2 units in the fiscal year ending March 31, 2027, a significant drop from the 19.86 million sold in the prior year. The price will also increase in Japan, from 49,980 yen to 59,980 yen. The move reflects an approximately 100 billion yen impact from rising component prices and tariffs.
The price adjustment puts Nintendo in a difficult position, balancing shareholder pressure against consumer sentiment. Nintendo's stock has fallen nearly 50% since its peak as investors worried the initial $450 launch price was unprofitable.
The primary driver behind the price increase is the soaring cost of memory chips, a crisis fueled by the global buildout of AI data centers. This is not unique to Nintendo; rival Sony Group Corp. previously increased the price of its PlayStation 5 by up to $150 in March, citing similar pressures. The days when consoles became cheaper throughout their lifecycle appear to be over, with Microsoft Corp.'s Xbox Series X also costing £50 more than it did at launch nearly six years ago.
The strategic necessity of the price hike is a point of contention among market analysts. Hideki Yasuda, an analyst at Toyo Research Advice, told Bloomberg that without a price increase, Nintendo's stock would continue to decline, suggesting the announced $50 bump may not even be enough to ensure profitability.
However, others believe it could alienate customers. "I think they would be foolish to raise prices," said Michael Pachter, an analyst at Wedbush Securities, in a comment to Bloomberg. At nearly $500 for an underpowered console with no bundled games, the Switch 2 becomes a tougher sell against its more powerful competitors.
Despite the hardware challenges, Nintendo's business model has long relied on software sales to drive profits. Consoles are often sold at a loss as a gateway to the company's lucrative ecosystem of first-party games. With recent hits like Pokémon Pokopia and a busy summer release schedule including a remake of Star Fox 64 and Splatoon Raiders, the company has a strong software lineup to drive platform adoption.
Nintendo is also experimenting with its software pricing. The upcoming Star Fox will feature a new dual-pricing model, costing $49.99 on the digital eShop and $59.99 for a physical copy, a strategy also applied to Yoshi and the Mysterious Book. This policy aims to balance the costs of physical distribution while encouraging digital sales, where margins are higher.
This article is for informational purposes only and does not constitute investment advice.
