Okay folks, Mike Ferro here, I wanted to tackle the Wii shortage issue from another angle from Triston’s take sort of round-table style. There is definitely no doubt the Wii is seriously kicking butt in sales out of all 3 current generation consoles. The Wii currently leading the pack with an estimated 25 Million sold world wide in comparison to Xbox 360’s 18 million and PS3’s 12 million, astonishing considering both the Wii and PS3 have only been out a little more than half the time Xbox 360’s been out on the market.

Just like Triston indicated, the Wii is in high demand despite recent studies showing it had the lowest overall score of “good” games. According to studies PS3 seems to have “overall” the best concentration of games, Xbox 360 was second, and lastly the Wii. So, does this mean consumers are just purchasing their Wii’s and leaving them in the corner collecting dust? According to Joystiq who did a little digging into Nintendo’s annual celebration announcement of achieving global software attach ratio of 6.07, their US attach ratio was 5.3 which is exactly what Microsoft Xbox 360 maintained for their initial launch year (which was phenomenal for a launch year). Of course Microsoft into it’s second and a half year now boast its 7:1 attach ratio, however no console has yet to beat PS2’s phenomenal attach ratio of 7.9 in 2002, or its 12.4 achieved in 2003.

Let us dig into the Wii supply issue at hand. Every month there’s been a supply issue, with Amazon displaying an almost permanent “sold out” disclaimer on the page. We know there is a supply issue, Nintendo knows there’s a supply issue, so what’s the problem, can’t they just manufacture more? Are they really holding back supply to keep demand high?

Well the reality is they have been shipping more units, more than ever. Per month the Wii have been selling around 700k units, at times selling more unit than both PS3 and Xbox 360 combined! They are shipping as many units per month than both their competitors would normally ship during Christmas time. The kicker is Nintendo is doing all the manufacturing from home, in Japan. They are actually manufacturing in Nintendo’s plants instead of having it outsourced to China or Taiwan much like their competitors. Sony started outsourcing the PS3 recently and Microsoft have been outsourcing all from the beginning. So, knowing these facts one may ask, where is the bottleneck then?

I can only assume Nintendo’s home factories are manufacturing at maximum capacity producing close to a million units per month, and outsourcing is sort of a risky business especially when talking about long term contracts and fitting oversea factories to make the Wii. Who knows when the Nintendo Wii phenomenon will die down to regular console sales, is it worth Nintendo to get into a long term contract with a Chinese manufacture to produce an extra 200-300k units/month?

Apparently there are manufacturing secrets Nintendo wants to protect as well. Reggie talks about this in his Q&A interview with Wired.

Reggie says:

“It is a complicated system to assemble, there are quite a number of proprietary techniques that we use to protect ourselves in terms of piracy and security. And so production will continue to remain in the Far East.”

So, there are some secrets they wish to protect, hmm… sounds like the manufacturing process for the Wii-mote no doubt; considering that’s the piece consumers have voted as the most advanced piece of technology on the Wii.

In addition according to Reggie it sounds like he blaming one of the suppliers as one of the constraints:

“We understand and sympathize with the frustration of consumers. We get calls, I get personal calls, from people wanting to know why we don’t just manufacture more. Believe me, if it were that easy, we would. The fact of the matter is that production depends on components from a wide array of suppliers, and if only one can’t increase their capacity, then we can’t increase ours. To make sure every available system makes its way to retailers as quickly as possible for the holidays we’ve tripled the work force at our distribution facility in North Bend, Washington.”

Well, there you have it folks, in my opinion the Wii is getting manufactured at full capacity from their factories, but if we want to blame anyone we should blame our neighbors for getting it to use the Wii-fit to exercise on. Just go out for a jog folks, its so nice outside.

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Entry was posted on Tuesday, May 6th, 2008 at 7:41 pm under Uncategorized.

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