Macronix, the primary supplier of ROM chips for physical Nintendo Switch and Switch 2 game cartridges, has announced it is ending its ROM chip production and gradually withdrawing from the gaming industry. The company said ROM chips are being crowded out by more lucrative, in-demand chips.
Macronix announced in its third-quarter earnings report that its ROM chip production “has reached its end” and that it will begin “gradually decoupling from the game industry,” according to the Taiwanese news site BigGo Finance.
Macronix's ROM production could be an issue for Nintendo; analyst David Gibson notes Nintendo uses it as its “main memory chip maker” for physical game cartridges. The AI industry's demand for memory and storage has also had knock-on effects on ROM chip supply.
Macronix's ROM production has shrunk 39 percent over the last year and now accounts for just 5 percent of the company's business. The company said its production capacity is stuck at 25,000 12-inch wafers per month, and that less profitable ROM chips are taking up wafer space that can earn more through other types of chips. While the company has $1.2 billion in planned new capacity, it will take a year or more to spin up.
Analysis
Why This Matters
- The physical game market for Nintendo, a massive global business, faces a fundamental supply chain disruption.
- It exemplifies how the AI industry's hardware demands are creating shortages and forcing manufacturers to abandon less profitable but essential products.
- Could accelerate Nintendo's push toward digital-only game distribution or force them to find and qualify new suppliers quickly.
Background
Nintendo's Switch and Switch 2 consoles use physical game cards that rely on proprietary ROM chips. Macronix has been a long-standing pillar of this supply chain. The company's decision to exit reflects a broader shift in the semiconductor market toward high-volume, high-margin products serving AI and data center clients.
Key Perspectives
Macronix: stated in its earnings report that ROM chip production has reached its end and it plans to gradually decouple from the game industry, as its wafer capacity generates more revenue when used for AI-related memory and storage products.
David Gibson, analyst: noted that as Nintendo's main memory chip maker for physical carts, Macronix's exit creates a potential bottleneck for the production of physical Switch and Switch 2 games.
What to Watch
- Whether Nintendo can secure a new or additional ROM chip supplier before Macronix fully exits.
- The timeline of Macronix's decoupling, and whether physical game releases for the Switch 2 are affected in the near term.
- Impact on Nintendo's strategy for physical vs. digital game distribution if cart supply becomes constrained.