High-Tech Crisis Hurting Video Game Makers

For all of its success over the past few years, 1988 is proving to be a challenging year for Nintendo. That’s because with a growing install base comes the demand for more Game Paks (game cartridges), which requires more microchips. Unfortunately the sector has seen such an increase in demand for these chips that Nintendo can’t secure nearly enough to satisfy its own sales forecasts, or those of its growing line of third-party licensees.

As we reported recently, Nintendo and its licensees have discontinued a wide range of games for the NES because they need to allocate the special chips to their new and upcoming titles. It’s not nearly enough, however, and many games that had been scheduled to be on store shelves by now have been pushed back to fall or even into 1989. Companies are making difficult choices to release fewer titles until supply finally gets better. The LA Times reports:

 

Nintendo of America has thinned out its video game library, dumping a popular version of Donkey Kong. Sega of America has delayed introduction of some new video games and is concerned about hitting its Christmas season sales target. And other makers of toys and yuppie playthings are standing by, nervously watching a seemingly unlikely barometer: the availability of key computer memory chips.

Like their high-tech brethren in the computer business before them, video game publishers are getting hit by a shortage of chips, the tiny bits of silicon and wire that let electronic gizmos store everything from personnel reports to Pac Man.

For video game makers, the critical shortage is of SRAMs, or static random access memory chips. Computer makers are suffering from an acute shortage of DRAMs, or dynamic random access memory chips. The two chips are similar, but SRAMs work more quickly and are less expensive.

The shortage of DRAMs, which began a year or so ago, is by far the more acute. But analysts and game makers say the crisis has started to spill over into the SRAM market.

Analysts at Dataquest, a high-tech market researcher, say they first noticed the shortage last month. They attribute the SRAM shortage to decisions by Japanese chip makers, which manufacture the majority of the world’s supply, to concentrate their efforts on DRAMs, a large and fast-growing market the Japanese also dominate.

“It’s a question of resource allocation,” said Dataquest analyst Michael Boss. “The Japanese companies are going where the money is, and that’s in DRAMs now.”

Nintendo confirmed Wednesday that it has stopped making 12 older games in part to free scarce chips for new games. The company said it also postponed the introduction of Link, a sequel to its best-selling Legend of Zelda video game, from February to October.

The result, Nintendo executives said, is that some video game players will have to do without.

“I think when the year ends, (video game) supply will be 10% to 15% less than what real market demand is,” said Peter T. Main, Nintendo’s marketing vice president.

A competitor, Sega of America, said it isn’t feeling the effects of the shortage as greatly because it relies more heavily on different memory chips. Still, the SRAM chip shortage is forcing Sega to delay introduction of some new video games until next year, said David Rhodes, marketing vice president.

 

Another side effect of the chip shortage is a steep increase in game prices. That’s because Nintendo is having to pay more for the chips. Instead of a $2 charge they’re now having to pay as much as $12 apiece, and the costs get passed along to the consumer. When the NES first launched in 1985 most games retailed between $19.99 and $24.99. The latest million-seller on the NES, The Legend of Zelda, has a suggested retail price of $44.95. Upcoming games from many third-parties also have higher price tags, some going as high as $49.95 – more than double of what NES games were selling for just a few years ago.

Most industry experts predict the chip shortage will last throughout the remainder of 1988. Supply is expected to catch up with demand in early 1989, but keep in mind there may be a bunch of pent-up demand still in place from this upcoming holiday season. Nintendo is expecting to sell somewhere around 7 million NES consoles – that’s 7 million more hungry customers eager to buy more games!

 

[Source: L.A. Times]

 

Craig has been covering the video game industry since 1995. His work has been published across a wide spectrum of media sites. He’s currently the Editor-In-Chief of Nintendo Times and contributes to Gaming Age.

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