Nintendo’s billions come from ignoring the latest technology – here’s why

Nintendo Co., Ltd.’s (NTDOY) Switch 2 is off to a record start, with 3.5 million units flying off shelves in the first four days after its June 2025 launch, the fastest debut in the company’s history. Priced at $449.99, the hybrid console adds a brighter 7.9-inch HDR display and 120Hz variable refresh support, yet it still lags behind competitors in terms of raw performance.

This gap in performance is no coincidence. For decades, Nintendo has thrived by avoiding the semiconductor arms race and shipping “good enough” technology wrapped in fun design and beloved intellectual property.

The power of “good enough” technology.

Game Boy engineer Junpei Yokoi coined Nintendo’s guiding slogan: “Lateral thinking with withering technology,” meaning that the company must creatively reuse mature, cheap components.

The 2006 Wii embodied the idea, recycling modified GameCube silicon from the 2001 era that cost a fraction of Sony’s PS3 chipset. However, its motion-sensing novelty, low price, and familiar game library turned it into one of the all-time bestsellers.

Lean hardware bills translate directly into profits. In fiscal 2024, while competitors supported high-end consoles, Nintendo generated 1.7 trillion yen (about $11.5 billion) in revenue and 529 billion yen ($3.6 billion) in operating income on legacy models like the Switch 1, achieving an industry-leading margin of 30% or more.

Cheaply built consoles allow the company to price aggressively, ride out currency fluctuations, and maintain a strong R&D budget and stock buyback strategy. In short, the “good enough” hardware proved to be more than good, it was very profitable.

How Nintendo turns limitations into innovation

Technical limitations therefore force Nintendo engineers to surprise players in other ways. DS doubled the number of screens rather than the number of pixels; The Wii Remote turned a low-powered box into a living room sports phenomenon; And the original switch is integrated and the TV turns on without chasing 4K.

All prosperity arose from within the confines of modest specifications. The Switch 2 follows suit: Instead of ray-tracing dominance, it offers backward compatibility, Joy-Con 2 feel, and a 4K-capable dock that unlocks value in existing game libraries.

The result is a virtuous circle: accessible hardware invites a broader demographic, larger install bases attract developers, and expanded software catalogs lengthen console life cycles—often several years or more—extracting significant revenue from each transistor.

Why might investors misread the gaming market?

Because Wall Street often equates technological leaps with market performance, Nintendo shares have periodically traded at discounts whenever specifications appear outdated. Ahead of the Switch 2’s debut, the company lowered its 2025 forecast, citing declining demand — and the stock fell. However, record demand forced analysts to raise revenue targets to just under 2 trillion yen (about $13.57 billion), underscoring how quickly sentiment can swing when Nintendo unleashes a new idea built on proven technology.

Meanwhile, revenue from movies, games, theme parks and mobile apps added 92.7 billion yen (about $630 million) to fiscal 2024 revenue, dampening hardware volatility and highlighting the unrealized value of Nintendo’s intellectual property.

In other words, spec sheets don’t capture the intangible moats or flywheel of popular culture that allow Mario to sell consoles, and vice versa.

Apply Nintendo’s strategy to your portfolio

What can individual investors learn?

• Remember, “better” technology is not always synonymous with “better” business. Companies that leverage mature, even low-value, technology can still enjoy higher profit margins and faster payback periods.
• Look for companies that combine frugal engineering with differentiated customer experiences, whether through iconic brands, network effects, or ecosystem lock-in.
• Optional Monitoring: Nintendo’s expansion into movies, streaming, and theme parks has turned familiar characters and games into multi-channel cash flows, reducing portfolio exposure to any single hardware cycle.
• Resistance to knee-jerk reactions to specification noise. Ask instead if the management team has a track record of delighting users while monetizing veteran technology.

Nintendo continues to prove that fun, not frame rate, drives sales and profits. By combining mature components, innovative design and evergreen intellectual property, the company has once again turned technical humility into commercial dominance, and investors who looked beyond the specifications have shared the reward.

As the Switch 2 launch attests, sometimes a billion-dollar strategy is just “good enough.”