The manufacturing cost of the Switch 2 is US $338 (Data from Vietnam)
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Shubh_C63
Member
If we are just talking hardware then I'm pretty sure Xbox and PS systems at one point was sold at a loss, multiple times I think.
Yeah Nintendo has never sold at a loss.
hemo memo
You can't die before your death
Yeah me too. It seems less like a toy and more like a proper portable from the impressions we've heard.
hemo memo
You can't die before your death
Wii U was sold at a loss I believe.
Baemono
Member
Microsoft never made a profit on Xbox console sales, so not for the Xbox One, but I believe the PS4 was profitable
Baemono
Member
Indeed
There are lots of parts needed to make a portable console. Motherboard + memory + storage + screen + battery + frame + wireless/BT/audio + joy-cons + dock.
I estimate it to be around $21 + Nvidia's margin, with a $5000 wafer cost.
hemo memo
You can't die before your death
And between the internal component licenses and all the software and brand agreements, the sheer number of moving parts in launching a gaming console is wild.
UltimaKilo
Gold Member
Everyone is also missing R&D costs in addition to shipping and packaging. They're maybe, at best, making a $20-30 profit on each unit sold and at worst, breaking even.
Not that big of a deal, they'll make up for it in software sales.
Felessan
Member
It's not included in BOM and usually not accounted when talking whether console sold at loss or a profit, as these costs (along with marketing, SG&A etc) are not attributable to particular unit and go against overall profits of companies and not cost of goods
Furukawa bonus also not included into calculating cost of switch2 btw
BlackTron
Member
I'm actually VERY happy with the screen in Switch 2. When I wanted a Switch 1 with the newer Mariko chip to overclock better, I intentionally avoided the OLED version and got a vanilla model with the new chip in it. If the new one was OLED I'd be worried the new screen will have the same flickering/frame insertion issues that caused me to avoid the old one and get nervous about Switch 2 (it gives me a headache, and I turn down the brightness of old switch at night as it is).
Thank you, Nintendo, for giving me the product I want while annoying Gamer79 in the process: an HDR VRR screen with 120hz and great viewing angles. Haters gonna hate!
Woopah
Member
30% tarrif is still a problem I would say.
Great Auk
Banned
Yes of course you are correct.
My broader point is that businesses make products with the intention of making money. Whether that profit comes right in the beginning or they have to take a loss for awhile before they make a profit, at the end of the day they made the product to make a profit.
Amazon was operating at a loss for years. Bezos wasn't doing that because he wanted to lose money lol. He knew that in order to make profit, he'll have to take a hit for awhile.
Great Auk
Banned
The guy I quoted seemed like he was offended by Nintendo making a profit on day 1 lol (if that's even true, that price was only BOM.) My general point was that without profit they'd be no Switch 2 or anything else. Whether they need to wait before they make money or they make it right away, at the end of the day the product exists because they want to make money. No prospect of making money = no product.
PlayStaytion
Member
Nintendo thinks they're selling drugs.
hemo memo
You can't die before your death
I mean, there are non-profit and government entities selling certain goods, or cooperatives, which don't sell for profit. But in the video game context yeah you're right.
Astray
Member
$450 is not a small cost for this manufacturing cost (which is liable to go DOWN over time too).
It's around $110 of mark-up on manufacturing. Sony and Xbox never dreamed of making this kind of mark-up on a base console.
People citing retailer % like they take it right at the top are also very clueless. Retailers (say, Walmart) pay the full amount (i.e. same as you pay) to the vendor, and when something sells to you, THEN they get their %20 back.
The other thing is the console makers all have their own distribution channels that don't charge them %20 either. Anything that sells out of Nintendo or PS Direct has much higher margins vs selling via major retailers.
It's around $110 of mark-up on manufacturing. Sony and Xbox never dreamed of making this kind of mark-up on a base console.
People citing retailer % like they take it right at the top are also very clueless. Retailers (say, Walmart) pay the full amount (i.e. same as you pay) to the vendor, and when something sells to you, THEN they get their %20 back.
The other thing is the console makers all have their own distribution channels that don't charge them %20 either. Anything that sells out of Nintendo or PS Direct has much higher margins vs selling via major retailers.
Woopah
Member
So as expected it looks like Nintendo is making a profit on the international version but a loss on the Japanese language version.
I'm a bit confused what you mean about the retailers here. How much do you think a US retailer is paying for each Switch 2.
Astray
Member
Retailers like Walmart or Target pay full retail price when buying stocks (this is called "sell-in"). In this case it's $450 for a Switch 2 console at the moment.
When you or I buy a unit off the shelf (which is called "sell-out"), Nintendo pays the retailer back %20 (or whatever % is in the Service Level Agreement), so the retailer gets said % of the $450 back as a fee for their distribution and retail work (this calculates to roughly $90 if it's %20).
The two parties square up at the end of the month or quarter etc, again the period is defined via the SLA.
Why do they do this instead of just doing things in the classic way: Selling-in at a wholesale price and having the retailer sell-out stock at whatever price they please?
Many reasons: This way the vendor can better control pricing (and retailer can push for discounts and rebates if stock isn't moving).
Additionally, retailers have additional ways of monetizing vendors too, mainly through things like listing fees, merchandising and marketing fees etc, those are typically paid by vendors from their marketing budget.
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In that case the retailer would still be taking a cut of the per-unit margin. It would just be taken when the unit is sold. So the talk about Nintendo not seeing the full $110 is still valid, especially considering the shipping costs as well.
Astray
Member
Yes. Keep in mind what I said about the percentage being an assumption on my part + Direct sales not having to pay said percentage.
Even after this % is taken into account, Nintendo probably still makes more money per Switch 2 than Sony per PS5. The mark-up is that substantial imo.
Where they really are taking a bath is in Japan with those language-locked units. They must be losing at least $20-50 per machine over there!
Woopah
Member
The yen situation is now fucking over Nintendo like it was fucking over Sony.
![L*][*N*K](/data/avatars/m/842/842515.jpg?1744192062){kind=avatar}
L*][*N*K
Member
Sony won game of there year with Astro Bot, no one keeps them in check.I'm just glad that they're around to keep Sony in check.
Astray
Member
Not just the Yen.
Nintendo has a Japan market they want to protect with their lives. They're willing to do a lot of stuff to keep that market and get people on Switch 2 before someone like Sony releases an actual competitor handheld device.
Sony at this point isn't really addressing this market properly and will need time in order to pivot accordingly.
Woopah
Member
The other big change they need to make is in software. Offering a handheld is a good start, but on its own its not enough.
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alf717
Member
I'm taking off to Vietnam to go grab mine right now.I think that some people here thinks this could work
Melon Husk
Member
Okay, so the $350 to $400 guess was right. It's Nintendo wanting to make a profit that makes up the difference.
As expected? This is borderline anti-competitive practice-they have a beef with Sony and want to crush them in the Japanese market, and they are funding it by making everyone else pay for it. Sony did a huge price cut for PS4 when Switch launched, but it was global.
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Idleyes
Gold Member
Profit? That $338 costs is likely only for assembling the Switch 2. It unlikely that said cost includes shit like:
Distribution (shipping, warehousing, retail handling)
Marketing and promotional costs
R&D (the money spent designing the console)
Licensing and royalties
After-sale support
Edit: In other words I believe they might be lucky to break even if they don't make any software sales and only sold the Switch 2. VERY LUCKY.
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Melon Husk
Member
Sony sells PS5 digital at manufacturing cost.
Woopah
Member
The Switch 2 launch price in Japan is the same as the PS5 launch price. Its not about crushing Sony but about not wanting to lose their 30 million+ audience.
Nintendo can have a semi-decent price in the US and still make a profit. They can't do that in Japan due to the yen.
DaleinCalgary
Member
correct, thats 20% inflation on previous costs
Idleyes
Gold Member
And that's not Trump or Biden's fault. That's Every American's fault. Dumbasses keeping buying that lobbyist merchandise called the RNC & DNC. America is in second place biotches! Get over it. Now stop blaming China while punching each other in the face and get back in the fight FFS!
END RANT - Please don't ban me. I'm a bitch ass nigga in real life so I'm harmless.
Idleyes
Gold Member
Smart move, I think they realize software is the real goldmine. Digital sales are basically money trees.
Generic
Member
The Switch 1 had a cost of $257 per unit and it was sold for $300:
www.vg247.com
The PS5 had a cost of $450 and it was sold for $500:
www.pcmag.com
The Switch 2 is extremely overpriced. Nintendo could easily release it for $380, or at worst $400, but of course they won't.
Nintendo Switch estimated to cost $257 to manufacture
Every Nintendo Switch costs the company around $257 to make.
www.vg247.com
The PS5 had a cost of $450 and it was sold for $500:
Report: PlayStation 5 Costs $450 to Manufacture
An expensive cooling system and high demand for DRAM and NAND flash memory have pushed the price up.
The Switch 2 is extremely overpriced. Nintendo could easily release it for $380, or at worst $400, but of course they won't.
Melon Husk
Member
I assume the PS5 dg "slim" is cheaper to manufacture than the 2020 version (but then again, inflation...) but as I check it's sold for $433 on Amazon right now.The Switch 1 had a cost of $257 per unit and it was sold for $300:
Nintendo Switch estimated to cost $257 to manufacture
Every Nintendo Switch costs the company around $257 to make.
The PS5 had a cost of $450 and it was sold for $500:
Report: PlayStation 5 Costs $450 to Manufacture
An expensive cooling system and high demand for DRAM and NAND flash memory have pushed the price up.
The Switch 2 is extremely overpriced. Nintendo could easily release it for $380, or at worst $400, but of course they won't.
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schaft0620
Member
EXACTLY
30% of $338 = $101.4
$101.40 + $338 = $439.40
$338 doesn't include shipping costs, R&D, marketing, etc etc. People think Nintendo are making $100 when they are probably losing $20 per console.
RomanceDawn
Member
Some of ya'll have never run or operated anything in your lives. So much stage 1 thinking. Consume and complain, consume and complain. Or rather it's more like complain and consume anyway
At least a decent amount of people in here understand certain business practices beyond the manufacturing costs.
If it was up to these message boards everything would be free, all companies would do everything out of the kindness of their hearts. Just free entertainment and labor from all gaming employees! It's just games right? They don't have families to feed, lives to uphold. Then half the forum would wonder why their favorite studios would begin/continue to drop like flies.
At least a decent amount of people in here understand certain business practices beyond the manufacturing costs.
If it was up to these message boards everything would be free, all companies would do everything out of the kindness of their hearts. Just free entertainment and labor from all gaming employees! It's just games right? They don't have families to feed, lives to uphold. Then half the forum would wonder why their favorite studios would begin/continue to drop like flies.
Felessan
Member
Nintendo primary competition in Japan are phones (dominant force there), so it's understandable that they are not willing to give-up even more position and ready to swallow the cost.
Sony does not compete with phones (it's actually build symbiotic relationship with them), it's compete with PC in Japan, and PC parts are also adjusted for exchange rate.
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Arioco
Member
Samsung's 8nm node is just 5000K per wafer? Not too bad. At least compared to more advanced modes from TSMC which are crazy expensive.
So that's around 220 functional chips per wafer, am I right?
Any idea hoy much Nvidia's margin could be for a small SoC like this or that's a secret between Nvidia and Nintendo?
Woopah
Member
Potentially it won't be that bad for Nintendo because they have a lot of production capacity in Vietnam, which currently only has a tarrif of 10%.
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At the time, 8nm was being reported as costing half of TSMC 7nm, which we know is priced at around $10k per wafer. That's also in line with the estimated $6k cost for TSMC 10 nm. (https://www.techpowerup.com/forums/threads/alleged-prices-of-tsmc-silicon-wafers-appear.272267/)
I was using the below die calculator (on a 300 mm wafer) with the defect density set to 0.07 and the edge loss set to 4nm, as these are the figures for TSMC 7nm, and I couldn't find the equivalents for 8nm. It doesn't seem like T239 has been cut down in the Switch 2 (to allow for defects), so I wasn't counting defective dies, yielding 236 usable dies per wafer.
Die Yield Calculator - iSine
DIE YIELD CALCULATOR Use this online calculator to figure out die yield using Murphy’s model. You’ll need to know the die size, wafer diameter, and defect density. iSine is your complete resource for ASIC design – from concept to manufacturing and testing. We have expertise in system...
isine.com
Regarding Nvidia's margin, this article was speculating that Switch 1 margins were similar to other products in Nvidia's OEM and Embedded line: https://www.nasdaq.com/articles/heres-how-much-money-nvidia-makes-nintendo-switch-2018-06-21
So eyeballing the included chart, that would indicate margins of around 40%, and if the same holds true for the Switch 2, an estimated cost to Nintendo of $35 per SoC.
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Arioco
Member
At the time, 8nm was being reported as costing half of TSMC 7nm, which we know is priced at around $10k per wafer. That's also in line with the estimated $6k cost for TSMC 10 nm. (https://www.techpowerup.com/forums/threads/alleged-prices-of-tsmc-silicon-wafers-appear.272267/)
I was using the below die calculator (on a 300 mm wafer) with the defect density set to 0.07 and the edge loss set to 4nm, as these are the figures for TSMC 7nm, and I couldn't find the equivalents for 8nm. It doesn't seem like T239 has been cut down in the Switch 2 (to allow for defects), so I wasn't counting defective dies, yielding 236 usable dies per wafer.
Die Yield Calculator - iSine
DIE YIELD CALCULATOR Use this online calculator to figure out die yield using Murphy’s model. You’ll need to know the die size, wafer diameter, and defect density. iSine is your complete resource for ASIC design – from concept to manufacturing and testing. We have expertise in system...
Regarding Nvidia's margin, this article was speculating that Switch 1 margins were similar to other products in Nvidia's OEM and Embedded line: https://www.nasdaq.com/articles/heres-how-much-money-nvidia-makes-nintendo-switch-2018-06-21
So eyeballing the included chart, that would indicate margins of around 40%, and if the same holds true for the Switch 2, an estimated cost to Nintendo of $35 per SoC.
Thank you so much for that thorough explanation.
I guess TSMC was never a viable option for Nintendo if they want to keep costs down so this is as good as we can expect. I'm still a bit worried about thermals and power consumption though, I'm very interested to see the first reviews.
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