April 20, 2007

A Nintendo Blunder?

The Nintendo DS and Wii continue to dominate game system sales month after month.

The strange thing is that the numbers are great, and yet it is still incredibly difficult to find a Wii to actually buy (and in some places it's hard to find DS lites too). This is what economists call a market failure. So today, Stephen Dubner on the Freakonomics blog asserts that it is a huge Nintendo screw-up:

Nintendo clearly made a colossal blunder in setting up their manufacturing... their inability to ramp up production in 4 months is pretty unusual in this industry. Note that there are no known parts shortages.

Do you think Stephen is right? Is Nintendo making a "colossal blunder"?

I wonder if Dubner is just losing sight of the actual number of zeroes involved. I am no expert in manufacturing, but I find it possible believe that there are simply not enough factories available to churn out a million Nintendo game machines every month - in the United States alone, Nintendo is selling more than a quarter million Wiis and half a million DSs monthly. How many consumer electronics products are produced in larger numbers? I can just think of one - Apple's iPod sold 11 million units in the last quarter - and they needed to buy half of Samsung's flash chip output to secure this capacity.

Posted by David at April 20, 2007 10:19 AM

I thought you might be right about the capacity problems, but then this story just broke about how Nintendo will now be significantly increasing capacity. Nintendo says that their problem was that "they couldn't accurately forsee demand."

I wonder if they'll be building a separate factory, and if Wii's from each factory will have slightly different quality standards.

Posted by: Kevin at April 27, 2007 11:23 AM
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