The worldwide semiconductor shortage may or may not be easing, but Nintendo is tempering expectations for the coming year regardless.
In its latest earnings report, the video game giant lowered its sales forecast for the popular Switch console by nearly 10 percent. So rather than selling 21 million units in fiscal year 2023, it's expecting to sell 19 million units.
What's behind the gloomier outlook? Still those pesky chips.
"While there is a gradual improvement in semiconductor and other component supplies and a recovery trend in hardware manufacturing for Nintendo Switch, taking into consideration production and sales performances thus far, we have modified the Nintendo Switch hardware sales units forecast for the fiscal year," the company wrote in its earnings release.
The report also showed a sizable drop-off in Switch sales from a year ago.
Unit sales for all Switch products fell 19 percent year-over-year, with sales of the original model falling a whopping 65 percent, and sales of the Switch Lite falling around 50 percent.
The new Switch — OLED Model totaled 3.5 million units in sales, which is more than both of the older models combined, but it wasn't enough to reverse the overall sales decline in the Switch family of products.
In the meantime, with the holidays fast-approaching, Nintendo said it's taking steps to meet demand by prioritizing production.
"By continually working to front-load production and selecting appropriate transportation methods in preparation for the holiday season, we will work to deliver as many Nintendo Switch systems as possible to consumers around the world," the company wrote.
This comes just a week after a Nikkei Asia report found that Nintendo plans to produce 20 percent fewer Switch consoles than originally planned, a fact which the company blamed on persistent chip shortages.
The Switch is only part of Nintendo's product portfolio, however, and net sales were up 5 percent for the quarter — though the company said a depreciating yen is largely responsible for the gain.
Rival console makers fared better in the hardware department.
Revenue from Microsoft's Xbox, for example, was up 13 percent last quarter, which some interpreted as a positive sign for the industry's supply chains.
DomsPlaying, the pseudonym for a popular game industry analyst, wrote in a recent blog post that the double-digit increase indicates that "the supply chain situation for consumer electronics is stabilizing, as is part availability, which leads to better retail inventories."
Sony, meanwhile, sold 3.3 million PS5 units in the last quarter, which is equal to what it sold in the same quarter last year. At a minimum, this suggests that the company is keeping up the rate of production, even as profits take a serious hit from higher supply chain-related costs.
Analysts have previously predicted that the supply chain challenges around consoles will push video game companies to diversify their business models with services.
"While consoles will remain an essential part of the gaming business and are not going to be phased out anytime soon, the shortages have driven home the fact that it is crucial to expand to business models that are more diverse and services-oriented," Michael Goodman, director of media strategies at Strategy Analytics, told S&P Global.
Indeed, digital sales at Nintendo increased 30 percent last quarter from the same quarter a year ago, as well as making up a larger share of total percentage of video game sales.
