Nintendo on why they're planning to launch Switch in China, the Chinese market overall, and the decision to work with Tencent

Coming from Nintendo's investor Q&A...

Question: I'd like to hear more about the thinking behind Nintendo's business expansion in China. Can we presume you chose to collaborate with Tencent in order to establish a solid base for your business there? Also, how long do you anticipate it will take to grow the business in China into one of the pillars of revenue?

Answer: Shuntaro Furukawa (President and Representative Director): It is true that Tencent Holdings Limited (“Tencent”) has applied for a game console review to launch Nintendo Switch in China, as disclosed on a Chinese government agency website. The reason for our collaboration with Tencent is because they hold one of the largest positions in China's network communication and game marketplaces, which we think will allow us to maximize the expansion of our business there. In the past, our dedicated video game systems like Nintendo DS and Nintendo 3DS were sold in China under the brand of our consolidated subsidiary, iQue (China) Ltd., but we cannot say these were a great success. With that in mind, we decided to work closely with a local company to do business in China.

We recognize that the Chinese market is vast and attractive, but looking forward, we don't expect our video game business in China to easily expand, given that our primary markets for dedicated video game consoles, Japan, the Americas, and Europe have been built over the course of more than 30 years. The launch timing for Nintendo Switch in China is not yet determined, so nothing in this area has been included in the financial forecast for the current fiscal year (ending March 2020). However, even if it were to be included, we would not anticipate it having a significant effect on overall financial results for this fiscal year.

With so many people around the world now playing games, we recognize that one of the challenges we must tackle with in the medium and long term is how we take the unique entertainment experiences that Nintendo offers with our integrated hardware and software and expand to regions beyond Japan, the Americas, and Europe. Discussions about expanding in China at this point are just one part of our larger approach for addressing a gaming population that is expanding widely, not just in our current primary markets. This is not a short-term plan, but something we want to work on steadily over multiple years.

China is a huge market, so the expectations for our business there are probably very high. The reality, however, is that the Chinese game market is almost all mobile games and PC games. The market for dedicated video game platforms has not been very large, so we recognize that this will be a new challenge for us.