Report: Nintendo Taking Huge Margins on 3DS

Kris Erickson • Apr 2, 2011 • Comments ()

In the life cycle of a new product, early adopters normally get a raw deal. Eager to grab the most recent piece of flashy tech, they are willing to line up in the cold outside of shops for the opportunity to fork over their money. Apparently things are no different with the latest handheld system from Nintendo, the 3DS. The device went on sale last month in Europe and the United States for the price of $249 USD. But according to industry intelligence firm iSuppli, the 3DS contains only about $103 USD worth of parts. By contrast, it wasn't until fairly recently that Sony was able to get its expensive PS3 console below cost, thus breaking even on every unit of hardware sold. Nintendo is definitely set to make a profit from day one on both its hardware and games.

Let's take a look at how the 3DS breaks down in iSupply's analysis. The most expensive component in the machine is the glasses-free 3D display manufactured by Nintendo's regular supplier, Sharp. The report by iSuppli puts the cost of the screen at roughly $33. The dual core ARM processor which powers the device comes in at about $10, Motion-sensing hardware runs an additional $7, and the WLAN connectivity is provided by a component that costs about $5.

Of course, this report does not take into account other costs related to the marketing of the device, such as transportation, advertising, licensing and royalties (for example those paid to Sharp to utilize their cool new screen). Nevertheless, it is likely that NIntendo is making a profit on the 3DS hardware sold at the current price point. Now the challenge is just to convince the public to buy it.