In an investor Q&A following Nintendo's earnings announcement, which revealed a five times increase in profits, president Tatsumi Kimishima shed some further light on his company's intent to satisfy Switch demand and ultimately make a profit on the hardware.
Thanks to the rapid sales pace of the Switch, Nintendo has already reacted by greatly increasing the amount they can manufacture, Kimishima said. And in fact, "Planning to ship 10 million units means that we actually plan to produce more than that including units in our warehouse and in-transit product." Importantly, once Nintendo ships its 10 million units, profitability on each unit sold isn't far off. "Volume efficiencies will start to emerge once we produce the 10 million units we expect to ship this fiscal year, but we will not get the benefit of this right away," Kimishima explained.
With big titles like Arms, Splatoon 2 and, most important of all, Super Mario Odyssey coming this year, Kimishima believes demand will get even stronger. He said the production model takes that fact into account. Furthermore, given the portable nature of the Switch, Kimishima noted, "...we think there will be households that feel as though one is not really enough."
Continuing on that point, Kimishima said that's one factor for why Nintendo now believes that Switch could match the popularity of the Wii, which went on to generate an installed base of over 100 million.
"For us, being able to reach an installed base of more than 10 million units is fundamental to creating a strong business... [It] will give publishers and the rest of our business partners a sense that the future of Nintendo Switch is more promising," Kimishima said.
"The truth is we want to raise the installed base of Nintendo Switch up to the same level as Wii. As we mentioned during our presentation, Nintendo Switch in America had the fastest start of any Nintendo hardware, despite launching in March. In the video game business, it's important for consumers to feel that a sales momentum is going to grow, and we are setting a standard with Nintendo Switch to release a continuous string of major software titles from now on. And if our sales go according to our plan this fiscal year, we will be able to see Nintendo Switch gaining the momentum in which it can approach relative parity with Wii afterwards."