Memory chip costs have jumped sharply as demand from artificial intelligence data centers strains global supply chains, prompting two of the largest gaming companies - Nintendo and Sony - to adjust pricing, forecasts and strategies to cope with higher component expenses.
Memory prices doubled in the first quarter compared with the prior quarter, and industry projections put further increases of up to 63% for the current quarter, driven by AI-related data center demand that has tightened availability for components used in smartphones, laptops and automobiles. Major memory producers including Samsung, SK Hynix and Micron have pledged to expand production with billions of dollars of investment, but industry observers note it takes at least a year to bring new production lines online.
Nintendo quantified the impact of higher component costs and tariffs as adding roughly 100 billion yen to costs in the current financial year. The company said those pressures were a material factor in its decision to raise the retail price of its new Switch 2 hardware, a move the company said also reflected exchange rate considerations.
Details for the Switch 2 price change include an increase of 10,000 yen for the Japanese-language Japan model to 59,980 yen, while the U.S. price will rise by $50 to $499.99. Nintendo said that with the higher prices factored in, profitability for the gaming business will be roughly unchanged from the prior financial year, according to comments at an earnings briefing.
Analysts flagged the significance of Nintendo's action. Morningstar analyst Kazunori Ito said, "The very fact that Nintendo felt compelled to act (price increase) suggests the rise in memory costs has become severe enough that it could no longer be absorbed internally - and, crucially, that there is little prospect of those cost pressures easing in the near term." He added, "This decision likely reflects a sober assessment that waiting for market conditions to improve is not a viable option."
The company also raised prices for older Switch models and for online gaming services, and indicated its playing cards will shift from a listed price to an open price determined by retailers. Nintendo projects sales of 16.5 million Switch 2 units in the current year, down from 19.9 million units in the prior year, and anticipates sales of 60 million software units.
Industry observers cautioned that the price adjustments carry risks for Nintendo because the Switch 2 is at an early stage in its product lifecycle and the company’s user base includes many casual players who tend to be price sensitive. Serkan Toto, founder of the Kantan Games consultancy, said Nintendo faces heightened pressure to release more first-party blockbuster titles this fiscal year to sustain demand for the system. Nintendo's games pipeline has been described as thin, though the company has seen a recent hit with "Pokemon Pokopia" and has upcoming titles such as "Star Fox" scheduled.
Sony, which announced a PS5 price increase in March, raised the standard PS5 model by $100 to $649.99 in the U.S. The company said it expects lower sales but higher profits in its gaming business for the financial year, and has authorised buying back shares for up to 500 billion yen.
Sony's management said the company has secured memory supplies for the current financial year but expects prices to remain high into the following year. CEO Hiroki Totoki told an earnings briefing the firm is pursuing cost reductions outside of memory. He also said PS5 hardware sales are contingent on the amount of memory the company can obtain at "reasonable prices," and that hardware profitability is expected to be similar to the prior year. The current profit forecast includes investment in Sony's next-generation platform as the PS5 enters its sixth year on the market.
Market participants noted that Sony stands to benefit from major software releases that boost high-margin sales and engagement in its ecosystem. One analyst, Amir Anvarzadeh of Asymmetric Advisors, wrote that "Sony’s bottom line stands to benefit significantly from the high-margin software sales and ecosystem engagement this launch should trigger" in reference to the anticipated November release of Take-Two Interactive’s delayed "Grand Theft Auto VI."
Both companies' shares have come under pressure in recent months as investors weigh the effects of supply-chain disruptions tied to the AI boom and geopolitical tensions, including the Iran war, on electronics manufacturers' margins. Sony and Nintendo are taking different steps to manage the impact: Sony through buybacks and securing supply, and Nintendo through direct price increases and assortment-level pricing changes.
The broader memory market dynamic that has afflicted gaming hardware also touches a range of technology sectors. Chip shortages and elevated prices affect smartphone, laptop and automobile makers that rely on the same memory components, creating cascading costs for manufacturers and potential price implications for consumers.
Exchange rate data included with the company briefings put the dollar at 156.7000 yen.
Should you invest $2,000 in 6758 right now? ProPicks AI evaluates 6758 alongside thousands of other companies every month using 100+ financial metrics. Using powerful AI to generate exciting stock ideas, it looks beyond popularity to assess fundamentals, momentum, and valuation. The AI has no bias - it simply identifies which stocks offer the best risk-reward based on current data with notable past winners that include Super Micro Computer (+185%) and AppLovin (+157%). Want to know if 6758 is currently featured in any ProPicks AI strategies, or if there are better opportunities in the same space?
As memory price volatility persists, gaming companies and the wider electronics supply chain face an uncertain period in which short-term cost passes, inventory strategies and capital allocation decisions will determine near-term profitability. For firms dependent on stable memory pricing, the lag between announced capacity investments by producers and the actual ramp of new production lines suggests elevated costs could remain a multi-quarter challenge.