Switch 2 To Be Sold At A Loss Due To Higher Production Costs, Analyst Says

Nintendo--which has a history of selling its consoles at a profit when its competitors may not--is expected to sell every Switch 2 console at launch for a loss. That's the belief of one analyst, who estimated the total bill of materials cost for the Switch 2 to be $400 USD. The system launches in June, priced at $450 USD.

Speaking to Bloomberg, Tokyo Securities analyst Hideki Yasuda made this claim and said the loss is "something Nintendo would be able to absorb." Yasuda previously said the Switch 2's new chip set alone might cost as much as $150, which compares to $80 per unit for the original Switch.

Video game consoles from Microsoft and Sony are historically sold at a loss when they launch, with these companies earning the money back through higher-margin opportunities like software and services. And over time, various efficiencies typically help to reduce the cost of producing the consoles themselves.

Nintendo famously bucks this trend, and most recently claimed the original Switch was not sold at a loss. Whether or not that's going to be the case for the Switch 2 remains to be seen. Nintendo will hold its next earnings briefing in May where the company is expected to face numerous questions about the console.

The impact of tariffs is a major question in all of this. Switch 2 units are produced in places like China, Vietnam, and Cambodia. While US President Donald Trump recently lowered tariffs in Vietnam and Cambodia to 10%, he increased tariff rates to 125% in China, and both are effective immediately.

Bernstein analyst Robin Zhu said if the tariffs remain at 10% in Vietnam and Cambodia, Nintendo will keep the Switch 2 priced at $450 and take a hit on margin. Had the original tariff plan been seen through, Zhu said Nintendo could have raised the price of the Switch 2 hardware by as much as $100.

Trump's new tariffs are now in effect as part of a 90-day pause to his original plan. Assuming the 90-day countdown began on April 9, it would come to an end on July 8, which is after the Switch 2's launch on June 5.

Nintendo of America president Doug Bowser recently said Nintendo had already shipped some Switch 2 units to America and they are now in warehouse awaiting delivery.

Switch 2 preorders in the US were expected to begin on April 9, but Nintendo delayed preorders due to the tariff situation. Now that things are somewhat settled in that respect, everyone is waiting for Nintendo to announce a new preorder date.

Adjusted for inflation, the Switch 2 is about $50 more expensive than the original Switch, which launched in March 2017 for $300 USD. Explaining the price increase, Nintendo's Bill Trinen said everything in life gets more expensive with time, and new Nintendo consoles are no different. Others believe Nintendo is raising prices simply because it can, knowing people will pay it.