Nintendo Moves Production Out of China, Sony and Microsoft May Follow
Rumors had been swirling about the Big 3 leaving China as a result of the Trump administration imposing tariffs on Chinese-manufactured goods, including video game consoles. However, it was only today that Nintendo gave weight to those rumors in an official statement to Reuters.
The Nintendo spokeswoman said part of the company's Switch production will move to Vietnam, and the process will begin this summer. Though nothing has been officially confirmed from Sony and Microsoft yet, they join the list of other technology and retail giants considering alternatives for their production needs.
The Americas make up 44% of Nintendo's profits, which would be hampered by the 25% tariff the Trump administration is proposing.
However, Nintendo's spokeswoman also made it a point to emphasize another rationale behind this move. Rather than it taking place solely to avoid impacts from the tariff — impacts that could potentially cost consumers and manufacturers millions — NIntendo is looking to diversify its risks by branching out.
At first glance, "risks" seem like just another way of saying "tariff hikes". However, as the Nikkei Asian Review also notes, Chinese production costs have been steadily rising for the past few years anyway. Even without the potential extra costs added on top of that, it's becoming more expensive to locate supply chains in China.
The reason for that is manifold, but it essentially boils down to China making changes in its labor and environmental regulations to avoid coming under fire from the international community. Production centers increase their costs to compensate, and it gets passed on to the company using that production location — and said company looks elsewhere for less costly methods of production.
What effects consumers will feel from Nintendo and possibly Sony and Microsoft shifting their production centers, if there are any at all, isn't certain, It's also unclear clear whether the change might affect Nintendo's new relationship with Tencent or production of the chip rumored to power the Switch Mini.