Nintendo President Explains Why R&D Switch Game Expenses Are Going Up

The Q&A summary for the Nintendo Financial Results Briefing for Fiscal Year Ended March 2021 are in. Nintendo President Shuntaro Furukawa took questions about the future of the Nintendo Switch and its games. This included why research and development (R&D) costs are going up and what people can expect in the future. Essentially, developing games and preparing for next-gen development can get expensive.

Here’s Furukawa’s exact statement on why Nintendo is spending more money on R&D. The question came up as the fiscal year ending in March 2022 estimates suggest it will cost “nearly 100 billion yen.”

Our software development costs, which include outsourcing, are increasing as we work to maintain a continuous stream of new titles for Nintendo Switch as it enters the middle of its lifecycle. Because per-title development costs are higher now than they were on past platforms, we anticipate that R&D expenses will continue to rise as we work to maintain a sizeable lineup of titles. We are also conducting a variety of studies, which include investigating ways to enhance our digital business, and future services that will help maintain long-term relationships with our consumers, as was touched on in the Corporate Management Policy Briefing last September. In addition, the development of the next generation of hardware needs to begin years before launch, so R&D expenses for that are gradually rising. We are aiming to grow by continuing our integrated hardware-software entertainment business, and that means conducting all sorts of research and development in various areas including both hardware and software.

Furukawa also talked about meeting demands for new Switch systems and games. As for games, he noted, “Many new software titles will be released this fiscal year, starting in the first quarter…” He also mentioned that the COVID-19 pandemic will affect system production plans, specifically mentioning semiconductor material acquisition issues.

Here is Furukawa’s full statement regarding making enough systems to meet demand.

As for production, we achieved steady hardware production through the end of last calendar year, and as a result, in the previous fiscal year we set a record for our highest fourth-quarter sales volume. Meanwhile, demand for hardware continues to exceed our expectations even after the beginning of this calendar year, and production has currently not caught up to this high demand due to the tight supply and demand situation for semiconductor materials worldwide. Although we are currently striving to produce as many units as possible, the fact is that our production plans are more uncertain than they were at the beginning of previous fiscal years. Our full-year sales plan is based on the premise that we can secure the materials necessary for production, but if we are able to produce more units, we will work hard to meet the strong demand, and to be able to ship and sell those units.

The two most recent Nintendo Switch game releases are Famicom Detective Club: The Girl Who Stands Behind and The Missing Heir.