Japan’s Fomalhaut Techno Solutions tore down the Nintendo Switch last week to estimate its bill of materials, and found that the console costs around $257 to manufacture. That’s just slightly above the $299 price tag, leaving Nintendo with slim margins. Of course, with sales estimated to be north of 30 million by the end of next year and the manufacturing cost coming down over that period, Nintendo is onto a winner here.
As you’d guess for a portable console, the components that cost the most are the touchscreen, processor and dock — which come out to $167. Each Joy-Con controller has an estimated cost of $45. Once again, not a lot of wiggle room for Nintendo as each controller retails for $50.
While Nintendo is selling the console for a lesser margin initially, the manufacturer is betting on its longevity to boost revenues. We’ve seen that time and again with the Xbox 360 and the Xbox One and also with the PlayStation series, and in the end the $299 retail figure may turn out to be a wise move by Nintendo. Pricing the Switch any higher than that would have made a lot of potential customers rethink the console, and by not bundling a game with the device, Nintendo is looking to recover any lost margins from game sales. With titles retailing for $59 each, there’s plenty of money there.