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The Nintendo (TYO:7974) Switch Mini has yet to be officially announced, but reports from Taiwan’s supply chain say that Nintendo is gearing up for production anyway sourcing parts from Taiwan.
Taiwan’s Macronix (TPE:2337) says that demand is high for its ROM chips, and orders from Nintendo have exceeded expectations.
“Nintendo has exceeded our expectations in the past two months. Demand is better than we thought,” Macronix chairman Miin Wu told the Taipei Times. “That is very unusual, as the first and second quarters are usually slow seasons.”
Nintendo’s spike in orders has offset the company’s losses from a sharp reduction in orders from Huawei, as Huawei is uncertain about future demand for its smartphones given a recent ban on US companies doing business with it. Huawei is one of Macronix’s top three clients, though Huawei accounts for less than 10% of its total revenue.
Earlier this month Macronix announced plans for expansion, as the trade war has made many companies scramble to rapidly retool their supply chains to avoid exposure to China. Given this sudden surge in demand, the company says there are supply constraints on all of its products, including ROM, NOR flash and NAND flash memory chips (it's important to note that supply of NAND and DRAM limited supply of the first Nintendo Switch -- though the shortage was for different reasons). Macronix executives have also been quoted as stating that they intend to issue a stock dividend of 2% this fiscal year, the first in five years.
A recent report from The Wall Street Journal states that Nintendo intends to move assembly of the console from China to South East Asia. While the report didn’t specify which country assembly would be moved to, Vietnam is likely high on the list considering Foxconn’s large presence in-country.
Nintendo has a history of offering refreshed versions of its hardware, particularly with handheld devices. If this upcoming Switch was truly a new version of the hardware -- a Switch 2 -- the market would see corresponding orders for new SoCs. So far this hasn’t been the case, and the new product is most certainly a Nintendo Switch Mini. Although, some rumours suggest that a revised version of the stock NVIDIA Tegra X1 T210 which the Switch uses might be in the works.
Trade War Winners
Southeast Asia continues to emerge as a big winner from the trade war. While emerging markets like Vietnam continue to grow with stratospheric might, Taiwan is also proving to be a winner too. Taiwan's primary rival for electronics supply chain sourcing -- parts like the NANDs that make the gadget world go ‘round -- is China and tariffs simply make sourcing from that country prohibitively expensive.
While a slackening of demand from Huawei, which is one of the largest smartphone vendors in the world, on paper would make for a few painful quarters for Taiwan’s supply chain vendors, the scramble to move supply chains out of China has offset that loss. In fact, Taiwan’s economic growth in 2019 is set to outpace regional peers Hong Kong, Singapore, and Korea which has thrown shade on the idea that closer ties with China are a guarantee of prosperity.
Macronix’s stock is up 3.5% on the Taiwan exchange, hitting TWD 22.30 (US $0.70) by mid-day.