The big picture: Memory makers have spent most of this year gearing their factories toward AI data centers, a shift that is reportedly affecting the chips in Nintendo Switch game cartridges. Taiwanese chipmaker Macronix is one of the main suppliers of the ROM for these cards. Now it’s going out of business to make more flash memory instead. However, Nintendo probably won’t run out of cartridges anytime soon.
MST Financial analyst David Gibson reported the change on X after reviewing the company’s latest quarterly report. Macronix will no longer develop new ROM products from now on. The latest quarter is also the last in which Macronix will report ROM sales separately. These sales accounted for just 5% of revenue, compared to 26% last year.
Meanwhile, the rest of Macronix’s company never made more money. The company posted net profit of NT$10.95 billion (about $338 million) in the latest quarter with a gross margin of 70.5%. A year earlier, this margin was just 13.5%.
Almost all of Macronix’s sales now come from NAND and NOR flash, meaning the company’s sales are almost evenly split. NOR was particularly difficult to obtain. TrendForce estimates that a single AI server requires three to five times more of them than a normal server. For this reason, NOR contract prices approximately doubled in the first half of this year.
Chief Executive Officer Miin Wu said during the company’s earnings call that data center customers are “looking to us for more capacity.” As a result, none of Macronix’s planned NT$37.8 billion (about $1.2 billion) in new spending will go toward ROM. Micron made a similar call late last year when it shut down its Crucial consumer brand to free up supply to AI customers.
For Nintendo, the consequences appear to be manageable for the time being, as Rohm Group companies also produce ROMs for their game cards. Gibson himself believes that physical cards are here to stay for a while.
It’s also unclear how much of this the Switch 2 achieves. Gibson’s thread states that Macronix’s chips are in cards for both consoles. But Nintendo Life has since removed the Switch 2 from its own headline due to contradictory reports.
Still, Gibson expects this move will lead to more games being digitized, including game key cards that only contain a download license and not the game itself. Downloads already account for around 60% of Nintendo’s software sales. Still, just last month, a Nintendo executive said there were “no plans to forego physical devices” with the Switch 2.
The memory shortage is already affecting Nintendo on another front. The company announced today that Switch 2 sales fell 41% year-over-year to 2.67 million units in its most recent quarter. This came after the console’s price was increased in the US, Canada and Japan as storage costs rose.
