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Nintendo and their fabricated hardware shortages
- Thread starter OsirisBlack
- Start date
GameCenterXDS
Member
Ps4 was barely selling out and there were shipments fast I was working at game stop. It wasn't like Wii
Jaded Alyx
Member
Nobody is talking about Wii there. The Switch has 2m for its launch month, just like PS4 sold.
Like the hat?
Banned
I don't think Nintendo can afford to build a ton of products right now. This includes the NES classic. After the fiscal year I'm sure they'll produce more. Right now everything is riding on the switch launch getting Nintendo into the black for this fiscal year. Anything outside of that is not a risk they can take. They can't launch yet another console that ends up with them not reaching financial goals.
Okami Haundo
Member
I'll gladly dispute your claim here. I live in the U.S. and had a defective PS4 on day one. I had to settle for returning it to Amazon as no major or local retailers had any stock with which I could swap my DOA console for at least 2 to 3 weeks.
To be fair, they also stated that the 2 mil figure could be ramped up pending demand. I'll be incredibly surprised if we don't see another wave of pre-orders before launch. Between impulse-buyers cancelling and more stock from Nintendo, retailers should have extra units.
Sony does more then just gaming hardware. They have much more access of facilities, manufactures, resources, supplies, possibilities of shipping and store there products all over the world.
outunderthestars
Banned
You can say this again again, but they won't listen.
Get that reason out of here. Clearly Nintendo has unlimited production capacity and simply hates money.
GameCenterXDS
Member
There is so many different factors. The simple remote goes very overlooked. Everyone who had ever used a tv remote knew how to hold it and use it's simple button layout. And the fact it was only $250 when at the time ps3 was $600 and xbox360 was at least 350 for hard drive. I'm just saying Nintendo could have shipped more of them, instead of just 30 at a time which created the whole reason for scalpers to cornering in on it in the first place.
So, uh, let's look at some math:
The first month of the Switch is slotted to be roughly 2mil (maybe a bit more if we take Kimishima's words at face value that they can ship some more). This is in mid-March for three weeks. (This number of total units is itself also in line with *holiday* numbers for the X1 and PS4.)
The Foxconn leak (which seems to be largely real for hardware things) puts the system at production on the order of 2000 units/day, or 600,000 units/month. Production of finalized hardware itself probably started sometime late last year, let's say around November. Moreover, the Japan Display information tells us that there are 3mil slotted for the entire initial batch (ie. launch). There are a total of 10mil ordered for the entire year.
3000k units in production from Foxconn is the same as the above stated 3000k units of screens from Japan Display. That is to say that, everything that Nintendo is producing at current based on leaked and reported numbers is accounted for numerically here. Are all of these units being shipped out?
Now, you may want to ask why is production so slow? Are they conservative? Are their guts slower to produce?
Foxconn also has some info on that end as well as they note that QC on these units is top notch. That will slow production quite a bit (but its ultimately good for the consumer as it means you get good hardware). Moreover, if the Foxconn reported chip leak is also correct, this will be the first (and only?) taped out custom-X1 on 16nm chip in the world. Yields on such a thing could potentially be low and subject to failure before maturity sets in for the production runs of the chipset.
The first month of the Switch is slotted to be roughly 2mil (maybe a bit more if we take Kimishima's words at face value that they can ship some more). This is in mid-March for three weeks. (This number of total units is itself also in line with *holiday* numbers for the X1 and PS4.)
The Foxconn leak (which seems to be largely real for hardware things) puts the system at production on the order of 2000 units/day, or 600,000 units/month. Production of finalized hardware itself probably started sometime late last year, let's say around November. Moreover, the Japan Display information tells us that there are 3mil slotted for the entire initial batch (ie. launch). There are a total of 10mil ordered for the entire year.
3000k units in production from Foxconn is the same as the above stated 3000k units of screens from Japan Display. That is to say that, everything that Nintendo is producing at current based on leaked and reported numbers is accounted for numerically here. Are all of these units being shipped out?
Now, you may want to ask why is production so slow? Are they conservative? Are their guts slower to produce?
Foxconn also has some info on that end as well as they note that QC on these units is top notch. That will slow production quite a bit (but its ultimately good for the consumer as it means you get good hardware). Moreover, if the Foxconn reported chip leak is also correct, this will be the first (and only?) taped out custom-X1 on 16nm chip in the world. Yields on such a thing could potentially be low and subject to failure before maturity sets in for the production runs of the chipset.
Feeroper
Member
Pretty much this. We have to wait and see what they will do in the future after the initial launch. I don't expect that this will have the same shortage nonsense that NES classic had, but I imagine they will keep it somewhat limited, enough to keep the hunger there, but not so much to deter sales in the end. The difference with this and the NES classic was the NES classic was a way to drive value in their brand and by limiting it and assuring it is one of the hot Xmas gifts, they develop a prestige that they probably feel was lost with Wii U.
They used this tactic for the SNES during the Japanese launch, they purposefully undershipped the console back then in order to create a frenzy that they could feed for an extended period. They often employ this tactic and usually it works.
In the end though, no one can say for sure if the shortages are intentional or not, we all just have a bunch of opinions on it. It will be interesting to see what they do in the coming year. I'm hoping they move a lot of units and it is a good success! It has some seriously amazing potential imo and I cant wait to get my hands on it.
Call it a myth or not, but plenty companies are using product scarcity in various ways and forms. Amazon uses "last 2 available, Buy now". Booking.com with "book with this special price right now - before it is gone". The same tactic can be easily applied to a console that is just launching to create extra buzz. People normally want more what they can't get, hence the perceived extra value. Whether it is a relationship, luxury car, gaming console etc...
Jaded Alyx
Member
They were already shipping record breaking numbers and you're saying they could have shipped more?? How, by waving a magic wand?
Chill Penguin
Member
This is a great post and covers pretty much everything. If people used a bit of critical thinking they too could understand this. People are just too busy on the Nintendo hate train to think logically.
Look at the amount of people who made a pre-order for the switch "Just in case it sells out". If there is huge amount of pre-orders available, this people will just cancel the preorder and wait for a price drop or a new game. And this same people will cancel their order if they feel they need the money for something else.Conservative estimates is what keeps your console desirable, most of the time, since people will buy it when they see it if they fear they might miss their chance.
Skittzo0413
Member
They shipped more Wii's than any other console maker had shipped any other console in history. I don't understand how that can be perceived as "undershipping" or "manufacturing demand" if it literally was the most anyone had ever shipped. That's just horrible logic.
Alebrije
Member
Do not think is fabricated but just programmed , they are not Sony or MS that can let go tons of money at launch in order to flow the market for an expected return later, they want to earn money from beginning.
I think after release you will get easily a Switch on a Walmart or SAMs Club but not at the same level you see Xbones or Ps4.
Do not expect big inventaries , inventaries is money , of you do not move them they generat more cost. Nintendo loves to print money at launch no loose it.
I think after release you will get easily a Switch on a Walmart or SAMs Club but not at the same level you see Xbones or Ps4.
Do not expect big inventaries , inventaries is money , of you do not move them they generat more cost. Nintendo loves to print money at launch no loose it.
Frankfurter
Member
This has been discussed so many times that I really don't how you (the OP) could have missed that. Anyways, I really don't think this has anything to do with "fabricating demand" (it wouldn't make sense anyway). Nintendo is probably simply being conservative.
I'm also wondering why no one ever argues that, say, Sony does this? PS4 was sold out in an instant. PS4 Pro is apparently pretty much sold out, although it didn't exactly see stellar sales.
I'm also wondering why no one ever argues that, say, Sony does this? PS4 was sold out in an instant. PS4 Pro is apparently pretty much sold out, although it didn't exactly see stellar sales.
GameCenterXDS
Member
Thank you, I feel Nintendo especially NOA and Reggie definitely factor in this kind of thinking.
It has been discussed quite a bit. Just short of ad nauseam.
You're missing a very obvious third option: they don't want to ramp manufacturing up past sustainable levels just to meet the initial demand spike, and they don't want to warehouse millions of units in advance with no revenue coming in. Nintendo is fundamentally a very conservative company that would more gladly ramp up to meet sustained demand after the fact when they have a runaway hit.
There's no conspiracy here, just the more complex aspects of supply chain management that surround most product launches. Every product that finds a receptive market has trouble meeting demand in the beginning.
Great post!
Steve Youngblood
Member
I've argued this a number of times, so apologies to anyone who might feel like I come across like a broken record, but while I can understand specific scenarios where limited supplies make sense, I don't understand it as a broad strategy. Like if you'd rather manufacture less of something and make more profit per unit, it makes sense if the MSRP is actually coming in at marked up scalper-level prices. If the plan is to stagger shipments and create a frenzy for the wave 1 shipments so that there's more urgency to buy when the wave 2 and wave 3 shipments conveniently come in then I get that as well.
But with a lot of these Nintendo products it often just comes across as a conservative underestimation of demand. Like, what was the master plan for the NES Classic? To drive up demand for the Switch which they also intended to deliberately undership? I don't know. I feel like people often ascribe nefarious motivations when it's unclear how these marketing ploys are going to actually pay off. The white board seemingly looks like this to me.
1.) We deliberately ship out too few units.
2.) We watch as demand skyrockets.
3.) ??????????
4.) Profit!
What's phase 3 in this master plan?
But with a lot of these Nintendo products it often just comes across as a conservative underestimation of demand. Like, what was the master plan for the NES Classic? To drive up demand for the Switch which they also intended to deliberately undership? I don't know. I feel like people often ascribe nefarious motivations when it's unclear how these marketing ploys are going to actually pay off. The white board seemingly looks like this to me.
1.) We deliberately ship out too few units.
2.) We watch as demand skyrockets.
3.) ??????????
4.) Profit!
What's phase 3 in this master plan?
It's a natural shortage but somehow happens every time they put a new product out.
If it's not an intentional understock they shouldn't be rushing the system to market so quickly they can't meet the demand of one day's preorder after the thing goes up for presale. That or the the people who were in charge of this should be canned.
If it's not an intentional understock they shouldn't be rushing the system to market so quickly they can't meet the demand of one day's preorder after the thing goes up for presale. That or the the people who were in charge of this should be canned.
Skittzo0413
Member
"Every time"
You mean, every time except most times. The Wii U and 3DS were not that hard to find after launch. The Wii was the fastest produced and shipped console in history. There is no conspiracy here beyond people cherrypicking a few examples of conservative production to try and paint a much broader picture.
GameCenterXDS
Member
One that people might be forgetting is the GameCube adaptor for Wii u. That was insane, people were demanding it and I doubt Nintendo could not have known that almost everyone that cares about smash cares about the GameCube controller. That Christmas no one could find it. Then it quietly appeared a few months later in spring. That felt like it Was intentional.
Steve Youngblood
Member
The issue to me is just that there's frequently going to be pent up demand for hardware launches due to both the number of enthusiasts who want shiny new things and scalpers who are eager to capitalize on enthusiasts desire for shiny new things. Further, even though things like pre-orders can be a helpful tool, it's worth noting that a pre-order isn't a sale. And while there is a danger that someone may get caught up in the launch hype, want to buy a unit, fail to find one, and then lose interest, I think that's probably less of a risk than "what if we highball these estimates and demand is way softer than we anticipated?"
Jaded Alyx
Member
And why would it be intentional? What did they gain from this besides leaving money on the table?
Steve Youngblood
Member
What do you feel was intentional about this?
Skittzo0413
Member
This makes absolutely no sense...
Why would they deliberately undership it to drum up demand and then "quietly" supply more in the Spring? If this artificial demand is actually happening then Nintendo would make quite a bit of noise about when they get new shipments, as that is the only way to capitalize on the pent up demand.
I truly don't understand what's so appealing about this conspiracy theory. None of these claims make the least bit of sense.
That is true, "fabricate" indicates malice, so there is a slight difference here.
But I don't see Nintendo straying too far from gauging demand ok-ish. The Wii was unexpected and it's very expensive to pump out more factories just to roll them back afterwards when the stores are flooded with stock. I do believe that they really tried their best to provide enough consoles for every market out there.
The NES mini was also unexpected, because come on: a retro gaming device in the year 2016? None of these games has any 'cool' features kids these days need and it doesn't even connect to the internet or anything. I was surprised as well about the demand, for me it was just a very very niche product targeted at hardcore Nintendo fans.
With the Switch, 2 million units seem alright for all markets. I am pretty sure that they can sustain the supply until November / December easily, because that's when the console is finally 'ready' to launch (online features, lineup...).
So I don't know many instances of Nintendo "fabricating" hardware shortages as indicated by OP.
dragonyeuw
Member
This is all a build-up to whatever console comes after Switch. And then, when that console under ships, it was all intended to create buzz/ brand awareness for the next console..... or something. Along the way they'll create SNES and N64 Minis and ship 150 thousand each to the market without pre-orders. This is all part of a build-up to the next thing, you see. It's an ingenious long-game marketing strategy by Nintendo, intended to maximize buzz, consumer annoyance, conspiracy theories and scalper profits.
LordRaptor
Member
Reggies ebay account
entremet
Member
That's how you stay in business. No products company wants stock rotting on shelves.
GameCenterXDS
Member
I don't know... Call me crazy but it worked. I was at game stop that year, people were talking about it and Nintendo when they normally wouldn't. "Oh hey I heard that GameCube adaptor was so hard to find someone payed 200$ dollars for it" *glances over at Wii u section, starts poking around* "man remeber how much fun we had playing melee together?" he says to his friend. I saw this happen multiple times.
dragonyeuw
Member
It was an adapter for the glacier-paced selling Wii U. Out of that, you look at how many Smash Bros units had been sold, and from there, how many of those people would be interested in GC controller enough to purchase an adapter for playing on the Wii U. That was never intended as anything but a niche product, not mass produced to the tune of millions.
GankzyMcfly
Member
Have you not heard of the law of supply and demand?
outunderthestars
Banned
Where is the incentive to Nintendo then? By holding back stock was it going to suddenly make people more interested in the game?
I really think you have a fundamentally flawed understanding of how business works.
So much this!
Remember this thing?
This dumb thing pretty much put the final nail into THQ's coffin due to overly ambitious production numbers.
There was this thing about NoA employees getting bonuses based on how far sales were above "expectations", which were of course set by the same employees that got the bonuses in the end.
Nintendo is all about gaming, you know.
Nintendo is all about gaming, you know.
Are we assuming Nintendo is a well run business again?!
Guardian Monkey
Member
From the Amazon thread yesterday..
So you mentioned that some preorders may be canceled from instore purchases? Does this still hold true? Or if you have a preorder already instore you are good? I am confused between todays post and yesterdays?
Edit: Wait I may have figured out what you mean.. You mean cancelling doing more preorders not existing preorders?
So you mentioned that some preorders may be canceled from instore purchases? Does this still hold true? Or if you have a preorder already instore you are good? I am confused between todays post and yesterdays?
Edit: Wait I may have figured out what you mean.. You mean cancelling doing more preorders not existing preorders?
Steve Youngblood
Member
So... it got people talking about Melee and looking at Wii U games? Was this after the accessory quietly reappeared in the Spring? When this happened was there a big uptick in Wii U plus Smash 4 plus GC Adapter sales?
GameCenterXDS
Member
Gamestop is f***ed up in general. One time we got a shipment of "used" games and one of them was xenoblade Wii. With 80$ price tag. I swear that game was never sold to anyone, the case felt brand new. It was like they stored it in a warehouse somewhere to pull it out years later as "used"with a 30$ price hike.
VegaShinra
Junior Member
Stores had a finite number of units available. Nintendo didn't cut off anything early.
Some people in this thread sound like they would prefer to deal with an Xbox 360 launch scenario again. Remember what? When GameStop took more orders than MS could ever reach and it took months to meet demand?
It was a reprint and GameStop sells it used to make more money. It was well-known. Just like Metroid Prime Trilogy. They reprinted the game and sold it used in a normal Wii case.
fredrancour
Member
well, they overproduced the WiiU and had to sit on excess stock for ages. Maybe they're aware that the product they chose to present at the switch presentation is WiiU 2: disappoint harder and don't want to sit on excess stock for a year again.
I'd totally believe that amiibo and NES classic supply issues were failed attempts at using manufactured scarcity to boost sales, or attempts by some regional/national employees to make themselves look good by ordering numbers guaranteed to sell out, but they do currently have good reasons to assume that the number of people who want a switch is very low.
I'd totally believe that amiibo and NES classic supply issues were failed attempts at using manufactured scarcity to boost sales, or attempts by some regional/national employees to make themselves look good by ordering numbers guaranteed to sell out, but they do currently have good reasons to assume that the number of people who want a switch is very low.
It is primarily about cash flow and operating capital on the balance sheet.
Being a conservative company they are cleary maintaining a high cash flow position while not committing too much operating capital to inventory.
In their mind it is much better to underestimate dmeand and have no invenotry left over with initial shipments than to over commit so much cash.
These are basic principles of accounting.
So yeah it sucks.
This is also compounded that Nintendo doesn't actually operate a supply chain anywhere. They don't have a warehouse just sitting somewhere to stock millions of units. Let alone the money to do so.
They are literally placing an order for mfg and shipping, the product is made and shipped across the water to a dock where a 3rd party likely breaks it down and splits it up to be shipped to their customers directly from the dock. It is possible they have a 3rd party warehouser/distributors do this too. All that costs money too. Either way it generally goes from boat to customer in simple terms.
We can go around on this forever but the undershipping is intentional but only because this is the accounting practices they choose to employ. They could just as easily acquire a loan or float a bond to build out more inventory like many larger companies like Ms and Sony do, but that is pretty clear not there jam.