Game console makers warn the chip shortage has 'no end in sight'

Sony and Nintendo say they still can't produce hardware fast enough to meet demand.

The new Nintendo Switch OLED model

The chip shortage has been a continuous roadblock to what is otherwise a record period of growth for the video game industry.

Photo: Nintendo

The global chip shortage is still squeezing the game industry, according to statements from representatives of Nintendo and Sony this week, timed to earnings results. In the words of Nintendo President Shuntaro Furukawa: "There is no end in sight to the semiconductor shortage at this point."

The chip shortage has been a continuous roadblock to what is otherwise a record period of growth for the video game industry, spurred by the pandemic and coupled with broader mainstream popularity of gaming.

While a number of the biggest video game makers continue to post record sales and profits — including Electronics Arts, Capcom and Bandai Namco this week — hardware makers like Microsoft, Nintendo and Sony are still contending with a semiconductor supply crunch affecting much of the electronics industry. Earlier this month, Intel CEO Pat Gelsinger said that the chip shortage is now expected to continue into 2024.

Nintendo's Switch handheld is entering its sixth year on the market, and demand for the device is beginning to wane. The company has sold more than 107 million devices so far, but Nintendo is hoping it can still sell tens of millions of units before it inevitably releases a next-generation version of the device some time in the next few years.

Furukawa said the transition to a new hardware device, amid the shortage and considering Nintendo's poor track record on backward compatibility, is "a major concern for us," according to a transcript translated by VGC. He added that "based on our experiences with the Wii, Nintendo DS and other hardware, it is very clear that one of the major obstacles is how to easily transition from one hardware to the next."

Because Nintendo is more reliant on hardware sales than its competitors, the company reported a 3.6% decline in sales last quarter and flat net profit, despite record software sales in fiscal 2021. It also projected a 20% year-over-year decline in Switch sales (down to 23 million units) in the year ahead.

Sony, which reported a strong quarter on Tuesday despite the crunch on PlayStation 5 supply, said it missed its original fiscal 2021 sales target by 3.3 million consoles, selling only 11.5 million in the device's second year on the market due entirely to constrained supply. The company is selling every console it can produce, but it's had to adjust its forecast on multiple occasions to account for the ongoing chip shortage. Sony expects the situation to improve in the following year, and it set a sales target of 18 million units for fiscal 2022.

"We feel very comfortable that we can get the parts and components, and we feel that there is a bit higher demand than that, so if the question is whether we can meet the demand, I think we're still short somewhat," Hiroki Totoki, Sony's chief financial officer, said on an earnings call earlier this week.

Microsoft, on the other hand, has managed to produce Xbox consoles at a faster clip due to what some analysts suspect is paid priority at semiconductor plants. Thanks to reduced demand for its devices compared to the PS5 and the availability of both a cheaper and more expensive version of new Xbox, the Xbox platform has gained market share against its rival two quarters in a row. (Right now in the U.S., you can order an Xbox Series X from Microsoft's website and have it delivered by June, while the Series S is widely available at all major retailers.)

Yet Microsoft has placed less priority on selling consoles versus signing up consumers for its Game Pass subscription and expanding its audience through cloud gaming.

For Nintendo and Sony, though, the issues run deeper: Nintendo wants a longer runway for the Switch before it has to start investing in the next generation, and Sony needs more consoles in more consumers' hands to sell first-party exclusive games and more subscription products of its own. Both companies are now gearing up to navigate a manufacturing crisis that's persisted for nearly two years, and likely will persist for many more.


Inside Amazon’s free video strategy

Amazon has been doubling down on original content for Freevee, its ad-supported video service, which has seen a lot of growth thanks to a deep integration with other Amazon properties.

Freevee’s investment into original programming like 'Bosch: Legacy' has increased by 70%.

Photo: Tyler Golden/Amazon Freevee

Amazon’s streaming efforts have long been all about Prime Video. So the company caught pundits by surprise when, in early 2019, it launched a stand-alone ad-supported streaming service called IMDb Freedive, with Techcrunch calling the move “a bit odd.”

Nearly four years and two rebrandings later, Amazon’s ad-supported video efforts appear to be flourishing. Viewership of the service grew by 138% from 2020 to 2021, according to Amazon. The company declined to share any updated performance data on the service, which is now called Freevee, but a spokesperson told Protocol the performance of originals in particular “exceeded expectations,” leading Amazon to increase investments into original content by 70% year-over-year.

Keep Reading Show less
Janko Roettgers

Janko Roettgers (@jank0) is a senior reporter at Protocol, reporting on the shifting power dynamics between tech, media, and entertainment, including the impact of new technologies. Previously, Janko was Variety's first-ever technology writer in San Francisco, where he covered big tech and emerging technologies. He has reported for Gigaom, Frankfurter Rundschau, Berliner Zeitung, and ORF, among others. He has written three books on consumer cord-cutting and online music and co-edited an anthology on internet subcultures. He lives with his family in Oakland.

Sponsored Content

Great products are built on strong patents

Experts say robust intellectual property protection is essential to ensure the long-term R&D required to innovate and maintain America's technology leadership.

Every great tech product that you rely on each day, from the smartphone in your pocket to your music streaming service and navigational system in the car, shares one important thing: part of its innovative design is protected by intellectual property (IP) laws.

From 5G to artificial intelligence, IP protection offers a powerful incentive for researchers to create ground-breaking products, and governmental leaders say its protection is an essential part of maintaining US technology leadership. To quote Secretary of Commerce Gina Raimondo: "intellectual property protection is vital for American innovation and entrepreneurship.”

Keep Reading Show less
James Daly
James Daly has a deep knowledge of creating brand voice identity, including understanding various audiences and targeting messaging accordingly. He enjoys commissioning, editing, writing, and business development, particularly in launching new ventures and building passionate audiences. Daly has led teams large and small to multiple awards and quantifiable success through a strategy built on teamwork, passion, fact-checking, intelligence, analytics, and audience growth while meeting budget goals and production deadlines in fast-paced environments. Daly is the Editorial Director of 2030 Media and a contributor at Wired.

Wall Street is warming up to crypto

Secure, well-regulated technology infrastructure could draw more large banks to crypto.

Technology infrastructure for crypto has begun to mature.

Illustration: Christopher T. Fong/Protocol

Despite a downturn in crypto markets, more large institutional investors are seeking to invest in crypto.

One factor holding them back is a lack of infrastructure for large institutions compared to what exists in the traditional, regulated capital markets.

Keep Reading Show less
Tomio Geron

Tomio Geron ( @tomiogeron) is a San Francisco-based reporter covering fintech. He was previously a reporter and editor at The Wall Street Journal, covering venture capital and startups. Before that, he worked as a staff writer at Forbes, covering social media and venture capital, and also edited the Midas List of top tech investors. He has also worked at newspapers covering crime, courts, health and other topics. He can be reached at tgeron@protocol.com or tgeron@protonmail.com.


How I decided to go all-in on a federal contract — before assignment

Amanda Renteria knew Code for America could help facilitate access to expanded child tax credits. She also knew there was no guarantee her proof of concept would convince others — but tried anyway.

Code for America CEO Amanda Renteria explained how it's helped people claim the Child Tax Credit.

Photo: Code for America

Click banner image for more How I decided series

After the American Rescue Plan Act passed in March 2021, the U.S. government expanded child tax credits to provide relief for American families during the pandemic. The legislation allowed some families to nearly double their tax benefits per child, which was especially critical for low-income families, who disproportionately bore the financial brunt of the pandemic.

Keep Reading Show less
Hirsh Chitkara

Hirsh Chitkara ( @HirshChitkara) is a reporter at Protocol focused on the intersection of politics, technology and society. Before joining Protocol, he helped write a daily newsletter at Insider that covered all things Big Tech. He's based in New York and can be reached at hchitkara@protocol.com.


This carbon capture startup wants to clean up the worst polluters

The founder and CEO of point-source carbon capture company Carbon Clean discusses what the startup has learned, the future of carbon capture technology, as well as the role of companies like his in battling the climate crisis.

Carbon Clean CEO Aniruddha Sharma told Protocol that fossil fuels are necessary, at least in the near term, to lift the living standards of those who don’t have access to cars and electricity.

Photo: Carbon Clean

Carbon capture and storage has taken on increasing importance as companies with stubborn emissions look for new ways to meet their net zero goals. For hard-to-abate industries like cement and steel production, it’s one of the few options that exist to help them get there.

Yet it’s proven incredibly challenging to scale the technology, which captures carbon pollution at the source. U.K.-based company Carbon Clean is leading the charge to bring down costs. This year, it raised a $150 million series C round, which the startup said is the largest-ever funding round for a point-source carbon capture company.

Keep Reading Show less
Michelle Ma

Michelle Ma (@himichellema) is a reporter at Protocol covering climate. Previously, she was a news editor of live journalism and special coverage for The Wall Street Journal. Prior to that, she worked as a staff writer at Wirecutter. She can be reached at mma@protocol.com.

Latest Stories