Nintendo ROM chip supplier Macronix quits to focus on chips for AI data centers, reports indicate

The death of physical games could be getting closer as Macronix, one of Nintendo’s key ROM chip suppliers for Switch and Switch 2 game cartridges, is reportedly shutting down its ROM business to focus on manufacturing NOR and NAND flash chips to supply data centers, multiple reports claim. Storage is already becoming expensive, and Macronix’s move may force Nintendo to increase cartridge prices, produce more Game-Key cards, or lean more towards digital purchases.

"Nintendo's main memory chip maker is quitting the Switch business," MST Financial David Gibson reports on X. "Macronix, which makes the ROM chips in Switch 1 and Switch 2 game memory cards, is phasing out that business. There will be no new ROM products, and Q3 is the last quarter it reports ROM sales separately.

He notes that Macronix ROM sales in Q3 of this year dropped to 5%, compared to last year’s 26%. Furthermore, Gibson says that the NT$37.8 billion capital expenditure is allocated to NOR and NAND Flash, leaving none for ROM as the company shifts its manufacturing capacity to supply AI needs — Taipei Times corroborated the report, stating, "At the same time, Macronix is gradually phasing out of ROM production, Wu said. It also reports that Macronix’s capital expenditure is split into two phases, the NT$ 22 billion for expanding manufacturing capacity, followed by an additional NT$15.8 billion for NAND flash used in eMMCs and 3D NAND.

Gibson expects that Nintendo’s digital margins will grow through more Game-Key Cards or digital-only sales, but as Macronix isn’t the only source of ROM chips, “physical cards will likely carry on for some time.” Gibson further reports that digital margins have been slowly rising, with numbers fluctuating depending on the quarter due to major physical game launches.

ROHM group companies ROHM Semiconductor and LAPIS Semiconductor still supply ROM chips to Nintendo, so it’s unlikely that Nintendo will eventually go digital-only in the near future like Sony and Microsoft’s recent plans. With one less supplier, however, Nintendo may be forced to increase prices on physical games.

The biggest loser in all of this (besides the gamers), however, may be fabless chip design company MegaChips. Nintendo doesn’t buy ROM chips from Macronix directly; MegaChips designs the ROM chips according to Nintendo’s needs and, having no manufacturing capacity, outsources it to Macronix. MegaChips’ 2022 company report states that Nintendo accounted for 87.8% of its sales, while Macronix accounted for 67.8% of its outsourced manufacturing purchases. The report even states that if Macronix could manufacture ROM chips, “MegaChips’ operating results may be impacted.” The 2022 document further says that there was no sign that the risk would become apparent; however, the risk just became very real, and we’re not aware of MegaChips’ contingency plan to deal with this situation. However, Macronix and MegaChips have likely talked amongst themselves about Macronix’s plans to stop ROM chip manufacturing, and have given MegaChips some time to find another manufacturer before Macronix shuts down the ROM chip business.