Nintendo Switch A ‘Home Run’ For Nvidia

Demand for the Nintendo Switch is such that Nintendo can barely keep the console-handheld hybrid in stock. The new device has been a boon for hardware Nvidia, too, who called the decision to dip back into the console business a “home run” during a financial earnings call Tuesday.

Nvidia shared the financial results (PDF) for the first quarter of its fiscal year 2018, which ended March 31, 2017. The hardware maker generated revenue of $1.94 billion during the quarter, an increase of 48 percent year over year. The Nintendo Switch turned out to be a sizeable chunk of that increase.

The Nintendo Switch uses Nvidia’s Tegra system on a chip (SoC). Nvidia reported the Tegra business saw a 108 percent increase in revenue from the previous year. The company more than doubled its earnings in the sector from $160 million to $332 million. The segment also earned $257 million in the previous quarter (October 2017 to December 2017) when Switch production was first kicking into gear.

Nintendo Switch
[Image by Nintendo]

The last time Nvidia was involved in the console hardware business was with the PlayStation 3, where it supplied Sony the graphics processor. It opted out of making the guts of the PS4, telling GameSpot in 2013: “we came to the conclusion that we didn’t want to do the business at the price those guys were willing to pay.”

“Having been through the original Xbox and PS3, we understand the economics of [console development] and the tradeoffs.”

Even with the success of the Nintendo Switch, Nvidia CEO Jen-Hsun Huang still says “Consoles is not really a business to us. It’s a business to them.”

He went on to explain the cost of making console hardware is high, but the chance to work with Nintendo on an “innovative” and “ingenious” mobile gaming device that could also serve as a home console was worth getting back into consoles.

“The opportunity to work on [the Nintendo Switch] was just really, really too enticing,” Nvidia’s Jen-Hsun Huang said during the earnings call transcribed by Seeking Alpha. “We really wanted to do it, but it always requires deep strategic thought because it took several hundred engineers to work on, and they could be working on something else like all of the major initiatives we have. And so we have to be mindful about the strategic opportunity cost that goes along with these. But in the case of the Nintendo Switch, it’s just a home run. I’m so glad I did it, and it was the perfect collaboration for us.”

The Nintendo Switch has found massive success in some re-releases, such as Mario Kart 8 Deluxe.
The Nintendo Switch has found considerable success in some re-releases, such as Mario Kart 8 Deluxe. [Image by Nintendo]

The latest estimates are the Nintendo Switch sold 2.74 million units worldwide since launch, as of April 24. The console maker forecasts it will sell another 10 million units over the next year. This means the Switch could potentially sell more in its first year than the Wii U did in its entire lifetime (13.5 million).

Amazingly, the Switch has sold well despite the same slim games line-up that gamers complained about with the Wii U. Fortunately, that line-up included The Legend of Zelda: Breath of the Wild, which sold as much as the console itself, and was quickly bolstered by Mario Kart 8 recently with ARMS and Splatoon 2 right around the corner in June and July, respectively.

Nintendo will need to keep the supply of the Switch steady to keep up with the demand as well to reach its unit sales goal. The console maker has shown it is willing to pull out the all the stops, though. The Wall Street Journal reported the company shipped units to North America and Europe by air to try and meet initial demand before moving back to sea freight in April.

[Featured Image by AP Photo/Koji Sasahara]