Pachter: Nintendo will fail to exceed 3DS supply demand until 2012
In casting his pricing predictions ahead of next year’s release for Nintendo’s 3DS handheld, Wedbush Morgan Securities analyst Michael Pachter has stated that he believes the company will fail in being able to meet consumer supply demands for the device until late 2012 – placing complicated three-dimensional screen manufacture as his reason.
Pachter’s comments came in response to the question, “Now that we have a fairly good idea of what the Nintendo 3DS will retail for in the US; do you believe the price point is too steep to maintain Nintendo’s usual handheld hardware sales?”
“I don’t. I think that the 3DS is going to be supply constraint for a while,” Pachter began. “I think that the hang up for Nintendo is that those screens are complicated to make and they’re rumoured to be buying them from Samsung, although I’m not sure where they’re buying them from. But right now the three-dimensional screens are really only available on digital cameras.”
He continues, “I imagine Samsung has only been making a couple of hundred thousand a month, there aren’t billions of those cameras out there. Samsung, if they’ve been making them, has only been making them for these digital cameras and they don’t make very many of those – I would guess 100,000 to 200,000 a month as kind of the demand.”
“Now we’ve got the 3DS coming out and arguably the demand will be two or three million a month, we’re talking about probably 25 or 30 million a year that Nintendo can sell if we get back up on par with prior DS annual hardware sales. So I think the ramp is going to be difficult and we’re only going to see a million a month supply for the first year, possibly for the first eighteen months. So I think Nintendo is going to sell out at any price.”
In terms of the target audience, Pachter feels that the new 3D capabilities will now allow Nintendo’s latest handheld to appeal more to hardcore audiences – something that he feels wasn’t achieved with the DS.
“I think that most hardcore gamers are really interested in the 3DS, as opposed to most hardcore gamers don’t really care about the DS,” Pachter explains. “The DS is SKU’d a lot younger, and I think most older people don’t care in the west. I think demand in Japan is going to be robust, I think demand in the west will be robust, so I think you’re going to see this thing sell out at a 10 million unit per year supply for at least two years. I think until they get up to 15 or 20 million units per year you’re never going to have supply exceeding demand, and so why not charge $250?”
“25,000 Yen actually turns into close to $300, I don’t think Nintendo will go that high and they’ll go $250 in the west,” he estimates. “Probably 250 Euros as well but that includes VAT, and probably something around £200 – so very, very expensive. Yes, Nintendo will sell as many as they can make until they satisfy that early demand. I don’t think that happens until sometime in 2012, so look for a $250 Nintendo 3DS.”