Nintendo and the Wii U May Be in Trouble due to Closure of Vital Semiconductor Factory

Nintendo and the Wii U May Be in Trouble due to Closure of Vital Semiconductor Factory

There may be more trouble on the horizon for the already slow-selling Wii U. On Friday the prominent semiconductor manufacturer Renesas Electronics posted its quarterly financial report, together with notice of extraordinary loss and a press release about an impending restructuring of the company.

As part of that restructuring Renesas, that merged with NEC Electronics in 2012, announced that it decided to close four semiconductor plants in Japan within 2-3 years, including the state-of-the-art factory based in Tsuruoka, Yamagata Prefecture  (as reported by the Wall Street Journal), and this may spell trouble for Nintendo and the Wii U.

The reason is quite simple. The closing factory was responsible for manufacturing the console’s Embedded DRAM, that is quite properly defined the “life stone” of the console.

The production of the 1 cm-wide semiconductor for Nintendo was responsible for more than half of the load of the factory at peak times, but the slow sales of the console determined a reduction in demand and a gap in the usage of the machinery and personnel, forcing the plant to run at a loss.

Nintendo told the Japanese Magazine Weekly Diamond that “the closure of the plant won’t have immediate effects on the production of the Wii U”, but the outlook of things isn’t too positive for the future.

Nintendo could try to contract another company to produce the component, but there are circumstances that make it difficult. According to a Renesas executive the production of that semiconductor was the result of the “secret sauce” and state-of-the-art know-how part of the NEC heritage of the Tsuruoka plant, making production elsewhere difficult. In order to restart mass production in a different factory redesigning the component may be necessary.

In light of the situation an increase in the production costs of the console seems very likely on the medium and long term due to the shift of production to a different location and to the possibility of a redesign of the hardware. One thing is for sure: the Wii U really can’t can’t get a break as of late…