Nintendo gains time to prepare for Switch 2 debut with tariff pause

A pause on the most punishing US tariffs in a century hands Nintendo valuable time to prepare the momentous June launch of its new console and lifts pricing pressure. For now.

The 90-day reprieve on heightened tariffs for most US trading partners gives the Japanese company a chance to ramp up shipments of the Switch 2 to a market that accounts for more than a third of its sales.

Roughly a third of Switch 2 units are assembled in Vietnam — which would’ve been subject to a 46 per cent levy, but now only faces the 10 per cent universal tariff imposed by Donald Trump’s administration. Nintendo can focus all that production on the US and stock up as many units as possible over the next three months.

The company is preparing for what the industry expects to be the largest gaming console launch in industry.

Hosiden Corp, one of three main Switch 2 assemblers, shipped more devices in February to the US from Vietnam than in the previous six months combined, according to customs data provided by NBD.

That suggests Nintendo can build a stockpile of millions of consoles from the Southeast Asian country in time for the June launch.

Notably, almost all of Hosiden’s production went to the US starting January, from about 11 per cent to two-thirds over the previous 12 months, the data showed. Shares in Kyoto-based Nintendo jumped 12 per cent on Thursday.

There’s no plan B for the company beyond the $US450 ($728) Switch 2, which will soon be the key platform for its popular game franchises. Nintendo is diversifying its business to better tap a rich library of intellectual property and beloved characters — via film, merchandise and theme parks — but to do that, it must have a thriving platform and expanding user base.

“If the tariffs stay at 10 per cent, Nintendo probably keeps pricing at $US450 and just takes the hit on margin,” said Bernstein analyst Robin Zhu. “At 46 per cent Vietnam tariffs, I expected them to raise by $US50 to $US100 ($162).”

Nintendo delayed pre-orders in the US to fully assess the impact of the new tariffs — which were announced mere hours after Nintendo’s online event unveiling the Switch 2’s price and launch game lineup.

The company has spent months strategising for the global release of the console and ensuring the first units land with gamers and not scalpers. In the UK, for example, it’s prioritising customers with a Switch Online membership and ample playing time on the Switch.

The initial launch window is a pivotal time for game consoles, much as with movie premieres. It sparks interest beyond loyal users and sets up marquee titles for a fast start. Sony Group’s PlayStation 5, released in late 2020, took years to gain momentum because of the pandemic’s impact on logistics and availability.

Nintendo may face similar challenges now with shipping its device out of Vietnam, which is also home to other major exporters to the US, such as Nike and Adidas.

While Vietnam and the US have started negotiations to forestall elevated tariffs, most companies are likely to hasten deliveries to the US to maximize what they can ship in the 90 days.

US levies on imports from China were hiked to 125 per cent as part of Trump’s Wednesday reversal of country-specific tariffs for most other nations. That makes it prohibitive for Nintendo to ship its made-in-China production to the US and also poses a challenge for its competitors.

“We believe the Switch 2’s bill of materials is around $US400 ($647), meaning Nintendo would still be selling consoles at a loss in the US with the 10 per cent tariff - but the loss would be something Nintendo would be able to absorb,” said Hideki Yasuda of Toyo Securities. “Sony is in a tougher situation as most of its PlayStation production is in China, and it may be forced to hike PS5 prices in the US in the near future.”

PC makers showed one path to navigating the tariff uncertainty over the first quarter by stockpiling inventory in the US and doing away with discounts. Nintendo, which plans to sell a Japan-only version of the Switch 2 that costs less than $US350, will likely do everything it can to avoid further price increases.

The Switch 2 already marks a climb up in price from the original Switch, plus Nintendo also announced the first $US80 console game with its Mario Kart World. The company faces the burden of convincing players to spend more just for the device and software, whose prices have been pushed up by escalating costs of production.

The US tariff threat still looms, but now at least the picture is clearer around the launch window of the Switch 2. That’s brought Nintendo’s Tokyo-traded shares back to within 1% of where they were before Trump’s Liberation Day speech that’s reverberated across global markets.

Bloomberg.