TOKYO -- Sales of Nintendo's Switch gaming console were more than twice that of Sony's PlayStation 5 during the year-end holidays, demonstrating the company's ability to turn the pandemic into an opportunity to attract new gamers.
The Kyoto-based company sold over 11 million Switch units, including its handheld Switch Lite, during the October-December period -- up 68% over the previous quarter. Sales also increased 7% compared to a year ago as the game market saw explosive growth due to the pandemic and was further boosted by demand during the 2020 holiday season.
Sales have remained strong even after the holiday period, according to Nintendo President Shuntaro Furukawa. "Demand has been stronger than expected even after the New Year," Furikawa said during the company's online earnings conference last week. The Switch's family-friendly nature and broad user appeal, including for children and women, continue to draw in new gamers and support high sales.
Sony launched its next-generation gaming console PS5 in November, around the same time as Microsoft's roll out of Xbox Series X and its lower-end Series S. At the end of December, Sony had sold 4.5 million PS5 units while game sales-tracking site VGChartz and other sources put Xbox at around 2.5 million units.
Masahiro Ono, an analyst at Morgan Stanley MUFG Securities in Tokyo, said Sony failed to cash in on demand for the PS5. "Considering it was the holiday season and people were mostly staying at home due to the pandemic, Sony could have profited greatly from nesting demand," he said. While Nintendo was able to capture new gamers, "Not being able to ship more PS5 machines was a lost opportunity," Ono added.
A major cause that hampered Sony's roll out of the PS5 is the semiconductor shortage, as demand for chips used in other products like smartphones and communication base stations has skyrocketed.
For example, the PS5 is a state-of-the-art console, powered by a hefty graphics processing unit to produce the high-quality graphics that attract gamers. U.S. chipmaker Advanced Micro Devices, which supplies Sony with chips such as the GPU and central processing unit, has acknowledged that the global shortage will likely impact the gaming industry.
AMD, which also makes custom chips for the latest Xbox, has warned that unprecedented demand will continue to affect production capabilities and that supply could remain tight for the PS5 and Xbox during the first half of the year.
Sony Chief Financial Officer Hiroki Totoki has acknowledged the chip crunch, saying, "We will make efforts to secure enough materials [and] do our best to meet demand."
This is not the first time Nintendo and Sony have gone head to head during the year-end shopping season. In November 2006, Nintendo debuted its Wii console while Sony launched PS3.
By the end of the fiscal year ended March 2007, Wii sold 5.84 million units compared with 3.61 million units for PS3. The following fiscal year, Wii sold double the amount of PS3 units. Many believe the PS3's launch price of $599 -- the highest of any major console at the time -- discouraged gamers.
"Wii was a social phenomenon," recalls Kenji Fukuyama, analyst at UBS Securities in Tokyo. Similar to the global popularity of "Animal Crossing: New Horizons" and Switch, "Wii attracted men and women of all ages with popular software like Wii Sports," he said.
Sony seemed to learn from its mistake, releasing PS4 in 2013 at a lower cost than PS3. The PS4 went on to sell more than 114 million units worldwide while Nintendo hit a snag, namely with the 2012 release of Wii U, which resulted in disappointing sales.
Nintendo expects to sell 26.5 million Switch consoles for the year through March, but many analysts believe this may be too conservative. UBS's Fukuyama estimates Switch sales will reach 27.5 million units, supported by soon-to-be-released software like "Super Mario 3D World + Bowser's Fury."
However, Switch is entering its fifth year on the market. "Switch sales have peaked this fiscal year and will begin to decline next year," predicts Fukuyama. He noted, however, that "Increasing download sales and also going into new markets like the Middle East, South America and Southeast Asia could slow the earnings decline."
Morgan's Ono also agrees that it will be difficult for Nintendo to maintain the same level of Switch sales next fiscal year. But for Sony, "It will be a year of fully popularizing the PS5," he said.
Sony has been able to amass a large online community of gamers through its subscription-based gaming services like PlayStation Plus, which now has over 47 million users and over 110 million monthly active users on the PlayStation Network.
"Rather than PS5 topping sales of PS4, maintaining this massive group of online gamers will be Sony's biggest mission," Ono said.