The global artificial intelligence boom is causing massive increases in memory chip prices, forcing Sony and Nintendo to raise hardware prices to protect their profit margins.
Both gaming giants are now grappling with supply chain disruptions and increased production costs, Reuters reports.
Memory chip prices doubled in the first quarter (Q1) and are expected to rise another 63 percent this quarter. The rise in memory chip prices has been driven by rising demands for AI data centers, which are responsible for disrupting supply chains for consumer electronics including smartphones, gaming and laptops.
Nintendo’s response and risk
According to Nintendo, switch 2 Japan will see a price increase of 10,000 yen and the US will see an increase of $50, which will be effective from September globally.
According to the BBC report, console prices will increase from $449.99 to $499.99 in the US and from €469.99 to €499.99 in most European countries.
In terms of financial impact, higher component costs and tariffs are expected to add 100 billion yen Super Mario Cost to manufacturers this year, as reported by President Shuntaro Furukawa.
Analysts warn that Nintendo’s casual fan base is price-sensitive, putting pressure on the company to release “blockbuster” games to justify higher console costs.
Nintendo also raised prices for its legacy Switch and online gaming services. This year, the company expects to sell $16.5 million Switch 2 units, compared to last year’s 19.9 million units.
Serkan Toto, founder of Kanton Games Consultancy, said, “Nintendo is now under more pressure than ever to bring out more first-party blockbusters this fiscal year to boost demand for the system.”
Sony’s strategy to deal
To manage the price increase, Sony also announced it was raising the price of the standard PS5 in the US by $100 to $649.99 in March. Although Sony has secured memory for the current year, it expects high prices to continue next year.
But, the company is looking for other ways to cut costs. Furthermore, Sony is also counting on a November release grand theft auto vi, Helping the company increase high-margin software sales.
“This launch will significantly benefit Sony’s bottom line through higher-margin software sales and ecosystem additions,” Amir Anvarzadeh of Asymmetric Advisors wrote.
According to both companies, the price increase only serves to neutralize rising component costs due to supply chain shortages.
