Nintendo Earns $43 For Every Nintendo Switch It Sells, Based On Estimate Of $257 Production Cost

With the initial batch of 2 million units of Nintendo Switch that the Japanese manufacturer shipped in late March to alleviate the shortage of the console, the company stands to earn a net profit of $86 million. It is based on an estimated production cost of $257 per unit and a selling price in the U.S. of $300. The figures would yield a $43 profit per switch.

Japanese Firm Tears Down Console

To come up with the $257 estimate, Fomalhaut Techno Solutions, a Japanese teardown company, gutted the Nintendo Switch to catalog the console’s individual components, Polygon reports. The bulk of the console components, made up of the dock, processor, and touchscreen, cost about $167. The Joy-Cons are reckoned to cost $45.

Fomalhaut had some difficulty estimating the price of the Nvidia processor and next-generation power supply of the Nintendo Switch because of lack of identifying marks. The Japanese firm assumed it was likely manufactured by Alps Electric. The estimated $43 profit for the console is quite good because a 2013 teardown made by research company IGS for PlayStation yielded lower net income, but higher profit for the Xbox.

Costs Of Other Consoles

IHS found that PlayStation then costs $363 to manufacture, giving Sony a profit of about $18 per piece since the console had a price tag of $381. For Xbox, the cost was only $347, earning for Microsoft $124 per piece with a selling price of $471 which includes the Kinect sensor package. However, even if Nintendo would earn $43 on each Nintendo Switch, given the high demand for the console, and an estimated 30 million units sold by the end of 2018, based on a Gamepur report, Nintendo stands to profit $1.29 billion from the console.

The Nintendo Switch and NES Classic Edition are so much in demand that when Best Buy announced on March 29 it had limited stocks of the two consoles, all its stock were sold out in hours. Similar sales trends were reported by Amazon and Toys R Us. However, Nintendo had some trouble with the switch’s launch title “1-2-Switch” because it challenged some media members to use a real-life cow farm for a showdown of the mini game. It was protested by the People for the Ethical Treatment of Animals for allegedly sugarcoating the subject because it took all the cruelty out of milking, Polygon reports.