On Friday, Japanese multinational companies, Sony and Nintendo, both flagged the impact from surging memory prices on their games businesses as the Artificial Intelligence (AI) growth restricts supply of chips and heightens upheaval across the tech industry.
Prices of memory chips surged in the first quarter alone compared to the previous quarter and are forecast to rise up to 63% in the current quarter as a result of AI data centre demand that has impacted supply for smartphones, laptops and automobiles.
According to experts, while top makers, Samsung, Micron and SK Hynix, have pledged to improve production by investing billions of dollars, it requires at least a year for a new production line to come online.
Nintendo, maker of ‘Super Mario’, said, higher cost of components, especially memory, as well as, the impact of tariffs is expected to roughly add 100 billion yen ($638 million) to costs in the current financial year.
Kazunori Ito, HSBC analysts, 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.”
Ito further said, “This decision likely reflects a sober assessment that waiting for market conditions to improve is not a viable option
President Shuntaro Furukawa said the higher costs of component, along with factors encompassing exchange rates, were reflected in the decision by Nintendo to increase prices of its Switch 2.
In an earnings briefing, Furukawa said, with hikes in price, the Company’s ability to generate profit will remain roughly unchanged from last financial year.
In March, Sony made known, it would increase the price of Play Station 5 (PS5).
