Following the financial disaster that was the Wii U, there's been an incredible amount of pressure on Nintendo to be successful with the Nintendo Switch. Although it's unclear specifically how well the new console has done for the company up to this point, we do know that it's sold beyond expectations, and apparently is being sold at a profit.
Following a complete hardware analysis, Japanese teardown firm Fomalhaut estimates that the Nintendo Switch costs $257 to manufacture. This includes all included components, the box, and overhead from the manufacturing process.
If true, this leaves very little room for profit at the console's current $299 MSRP, especially when you consider the costs of shipment as well as cuts that retailers take at point of sale.
Bloomberg's Yuji Nakamura reported earlier this year that Nintendo has confirmed that the Switch is profitable. However, it is unclear how significant its profit margins are.
Hardware being sold at a loss is standard in the gaming industry, or at least in the case of a new release. The PS3 was a particularly extraordinary example, having been sold at roughly a $241.35 loss at launch. If Nintendo really is selling at a profit, even if at a small margin, that's a huge achievement, especially when you consider that it has built a one-of-a-kind device with unique components.
Though surprisingly expensive to make, the Switch should reduce in cost over time as manufacturing processes are made more efficient. With this, a price drop will be likely.
