Nintendo Switch to be made in Vietnam
Nintendo will shortly begin producing Switch consoles in Vietnam for the first time, after US-China trade tensions put the gaming industry’s reliance on China-based production in jeopardy.
Analysts said rivals including Sony and Microsoft may follow Nintendo’s move depending on how Beijing manages its trade dispute with Washington. Any shift out of China would mark a significant break for the industry, which has long struggled to find alternative manufacturing sites due to both cost and quality reasons.
Following a report in the Nikkei newspaper, Nintendo said on Tuesday that it had been considering diversifying its China-heavy Switch production before trade tensions flared. Analysts said the decision was likely to have been influenced by the US threat of additional tariffs on Chinese products.
“This is clearly a move to address the US tariffs,” said Hideki Yasuda, analyst at Ace Research Institute. “It is possible Sony and Microsoft would follow suit.”
Nintendo makes almost all of its Switch consoles in China through several contract manufacturers including Foxconn. China is also a large manufacturing base for Sony’s PlayStation and Microsoft’s Xbox consoles.
Sony and Microsoft were not immediately available for comment.
In a rare joint letter to a US trade representative sent in mid-June, the three gaming companies warned that a price increase of 25 per cent “will probably put a new video game console out of reach for many American families”. Last year, 96 per cent of video game consoles imported into the US were made in China, they said.
The decision by the Kyoto-based games maker comes as companies worldwide including Sharp and Ralph Lauren consider reshaping their supply chain because of the continuing uncertainty over terms of trade, even after US president Donald Trump signalled a potentially softer stance during the G20 meeting in Japan last month.
In May, the US increased tariffs on $200bn worth of Chinese products from 10 per cent to 25 per cent and Mr Trump had threatened to impose 25 per cent levies on Chinese goods worth an additional $325bn.
A 25 per cent tariff would be a huge burden for gaming companies who are already struggling with thin profit margins on consoles. The Switch at present faces no import duties in the US.
Vietnam has benefited significantly from the US-China trade dispute. US imports from Vietnam surged almost 40 per cent in the first four months of this year compared with the same period last year, according to a Financial Times analysis of data from the US International Trade Commission.
This was the largest rise among the 40 biggest importers to the US. Over the same period, US imports from China fell 13 per cent, the second-largest contraction since 2009.