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Nintendo's OLED Switch to bridge gap before more powerful console – analysts

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Nintendo's OLED Switch to bridge gap before more powerful console – analysts

Although Nintendo Co. Ltd.'s new Switch video game console did not turn out to be the significant upgrade that many were expecting, analysts think the device will sufficiently tide hungry consumers over until the company launches a more powerful successor.

Set to launch Oct. 8, the Nintendo Switch (OLED model) will feature a 7-inch OLED display and cost $349.99, compared to the original $299.99 Switch that launched in 2017 with a 6.2-inch LCD screen. OLED is a next-generation display technology where each pixel on the screen can be illuminated individually. LCD screens, by contrast, rely on illumination from larger backlights.

Contrary to widespread speculation and media reports, the new model will not include a new chip from NVIDIA Corp. that would allow for 4K resolution when plugged into a TV. But given the continuing popularity of the Switch, analysts said this functionality is not needed right now for the new model.

Serkan Toto, CEO of Tokyo-based game industry consultancy Kantan Games, said it is very possible that the new Switch is an interim model intended to bridge the time to a larger upgrade. He noted that this is a hardware strategy Nintendo has followed with previous consoles, such as the DS and 3DS handheld devices that saw multiple iterations through their respective life cycles.

"It is a realistic scenario that Nintendo opted to hold off on releasing a really beefy upgrade because they still need time for a blockbuster to be ready and the global chip shortage caused additional issues," Toto said.

Nintendo did not respond to a request for comment.

Switch sales

Demand for the Switch reached a record high in 2020 as people sheltering at home amid the COVID-19 pandemic flocked to the console. Nintendo shipped about 28.8 million Switch consoles — including both the original device and the $199.99 handheld-only Switch Lite model — from April 2020 through March 2021, up 37.1% year over year. As of March 31, the Switch's lifetime sales stood at 84.6 million units, and the company expects to sell an additional 25.5 million units in its fiscal year 2022 ending March 31, 2022.

SNL ImageThe Nintendo Switch, the new OLED model and the handheld-only Switch Lite.
Source: Nintendo

"The impact from COVID-19 has certainly delayed hardware and software plans, but we also believe that increased demand for the Switch post COVID-19 has meant that a 4K device was not needed in 2021 and that the OLED model can sustain demand," said Daniel Ahmad, a senior analyst at gaming research firm Niko Partners.

Ahmad believes the new OLED model is primarily designed to sustain overall demand for the console and reinforce Nintendo's pitch that the Switch is a premium console worthy of its price point.

OK without 4K

Matthew Bailey, a senior analyst covering the global digital media sector at London-based consultancy firm Omdia, argues that there was never a compelling business case for Nintendo to launch a 4K device.

"The Switch is already enjoying strong momentum, and releasing a more powerful version would risk splitting the user base and complicating the development process," Bailey said. "It therefore makes sense for Nintendo to release a minor, fully backwards-compatible upgrade to the existing Switch hardware."

Bailey stressed that the OLED model should not be seen as a response to the PlayStation 5 and the Xbox Series X and S consoles, because Nintendo occupies a completely different space in the market to Sony Group Corp. and Microsoft Corp. Nintendo typically targets consumers who are mostly interested in playing games from the company's own first-party franchises, such as Zelda, Mario and Pokémon. The company also tends to focus more on accessibility for its consoles, with the Switch's hybrid functionality a prime example. In contrast, Sony's and Microsoft's devices include more high-end components and offer wide libraries of mostly third-party titles.

As such, Nintendo has no need — or intention — to compete head-to-head with either company, Bailey said.

"Instead, the main point of the OLED Switch is to give Nintendo customers more choice when it comes to its hardware, representing the most premium way to play Nintendo's acclaimed first-party titles," he added. "And, despite the lack of meaningful upgrades, this could well be a compelling enough reason for many Nintendo fans to pick one up when it launches later this year."

The next Switch

Given the demand for both Nintendo software and hardware this year, Niko Partners expects the new device to mostly appeal to new Switch buyers and a section of existing Switch Lite and original Switch owners who are looking for a more premium handheld experience, Ahmad said.

SNL ImageBreath of the Wild 2, the sequel to the best-selling Zelda game for the Switch, will launch in 2022.
Source: Nintendo

"We do expect Nintendo to launch a more powerful Switch console in the future, as it is clear there is demand from existing owners for high-end games that can be played on the TV and on the go," he said.

Toto thinks it is time for the Switch to have better hardware specifications, as recent titles from third-party developers such as Electronic Arts Inc. are already struggling to run optimally on the console.

"The Switch is surely very expensive, considering it is essentially tablet-grade hardware from early 2017," Toto said.

If Nintendo does intend to release a more powerful "Pro" version of the Switch as earlier rumors suggested, Bailey thinks it would make more financial sense for the company to do so alongside a new blockbuster title, such as Breath of the Wild 2. The game, which is set to release in 2022, is a sequel to the best-selling Legend of Zelda title that launched along with the original Switch in 2017.

"The prospect of playing that game in 4K in the living room on its own could prove a compelling enough reason for many fans to upgrade," Bailey said. "However, it is highly unlikely that we would see such a launch so soon after the release of the OLED Switch, which isn't due to hit shelves until October."