"It's a storage chip!" Huang He felt both surprised and unsurprised by this outcome.
The surprise stemmed from the fact that Nintendo actually needed storage chips, something unrelated to games and entirely unexpected by Boss Huang beforehand.
The lack of surprise was because Jiangnan Group's storage chips were undoubtedly the only product of their kind globally. If Nintendo wanted to purchase the best storage chips, they had no choice but to come to him, making it entirely unsurprising.
However, it was also lamentable. Fusang itself was one of the world's largest semiconductor-producing countries, possessing the most mature semiconductor system globally. It was only later that they were jointly targeted by the United States and South Korea, causing their semiconductor industry to be severely disrupted and fragmented, no longer matching its former glory.
But even a lean camel was larger than a horse. To think that to purchase a storage chip now, they had to approach him.
"Storage chips, isn't this your country's strong suit? Why do you still need to find us?" Boss Huang asked, narrowing his eyes.
"To be frank, our country cannot produce chips as high-quality and affordable as your company's!" Iwata Satoshi sighed, his expression filled with melancholy. Indeed, who would have imagined ten years ago that a proud Fusang enterprise would beg to purchase Chinese chips? This was an unprecedented historical breakthrough.
"You want our storage chips to produce game cartridges?" Boss Huang continued to ask.
"Precisely!" Iwata Satoshi looked at Huang He with some surprise, not expecting him to see through it so readily. However, there was nothing to hide; after all, they would find out sooner or later. He continued, "You've seen our newly released NDS handheld console. It's the finest gaming handheld in the world. The only weakness limiting it is the game cartridge, which serves as the storage device. We need high-capacity, high-read-speed cartridges, and your company's products are exactly what we need!"
The NDS game console followed the tradition of all Nintendo game consoles: the gaming console paired with game cartridges for play. The handheld console itself had no space to store games. If players wanted to play a game, they had to insert a game cartridge into the console before they could start playing.
This approach had numerous benefits. Firstly, it saved costs on the game console itself, lowering its selling price and further expanding the market.
Secondly, it made game cartridges more important and irreplaceable. Players could only play more new games by continuously purchasing game cartridges, and each game cartridge could generate significant profits repeatedly.
Concurrently, one of Nintendo's largest revenue streams, and one of its methods for exploiting third-party game developers, was charging exorbitant fees for cartridge duplication.
Nintendo stipulated that for any game from a third-party developer to be released on the Nintendo platform, all game cartridge duplication work had to be handled by Nintendo.
The reason given was that Nintendo possessed the highest cartridge duplication technology, which could maximize compatibility with the game console, preventing various experience issues caused by game cartridges and maintaining user experience.
This reason sounded noble, but in reality, Nintendo charged an additional 15% fee for every game cartridge duplicated. Third-party game developers already had to pay a 30% platform fee to Nintendo. Now, by having Nintendo duplicate their cartridges, they not only had to pay the expensive cartridge costs but also an additional 15% fee to Nintendo.
Nintendo naturally reaped immense profits, but the third-party game developers were bleeding profusely.
For instance, if a third-party game developer diligently spent 100 million yen developing a game and released it to the market, with total sales of 200 million yen.
While it appeared to be a profit of double the investment, which was quite substantial.
However, from this 200 million yen, 30%, or 60 million yen, had to be given to Nintendo as a brokerage fee.
Secondly, a 15% cartridge duplication fee, totaling 30 million yen, had to be paid to Nintendo.
Finally, Nintendo calculated the costs, with the total cost of all duplicated cartridges being 20 million yen. As a result, Nintendo took a total of 110 million yen, leaving only 90 million yen for the third-party game developers.
Despite making money, the third-party game developers ended up losing 10 million yen, while Nintendo earned 100 million yen in profit without doing anything.
Such policies naturally enraged the third-party game developers under Nintendo, but they were unable to resist due to Nintendo's dominant position in the game console market.
Ahem, that digressed a bit. Let's get back on track.
In short, game cartridges were Nintendo's vital means of exploiting third-party game developers, so Nintendo would absolutely not abandon game cartridges unless absolutely necessary.
In fact, Nintendo's previous president, known as the "Gaming Tyrant," who led Nintendo from a small playing card manufacturer to the world's largest game console producer, Yamauchi Hiroshi.
When asked if he would abandon game cartridges and adopt cheaper storage media like optical discs after his competitor Sony launched game discs, Yamauchi Hiroshi decisively stated that Nintendo would rather die than use such foolish tools to load games. xxs one
Furthermore, Yamauchi Hiroshi repeatedly emphasized in company meetings that the rule of never abandoning cartridges must not be broken. Iwata Satoshi had only been president for a little over a year and hadn't firmly established himself, so he naturally dared not defy Yamauchi Hiroshi's will.
In fact, until Yamauchi Hiroshi's passing, Nintendo's game consoles had no internal game storage capability. It was only after Yamauchi Hiroshi's death, with the release of the latest generation game console, the Switch, that it first came with a hard drive, i.e., internal storage space, allowing games to be downloaded via the internet without using game cartridges.
Meanwhile, Sony's next-generation PS console already had built-in storage space, which became one of Nintendo's major criticisms in the eyes of players: that they cared more about money than game experience and were relentlessly squeezing players dry.
Besides this criticism, cartridges also brought about a serious issue: the cost of Nintendo games.
It is well known that any company that manufactures game consoles does not make a profit. The Switch, selling for just over 2,000, has a graphics performance that can even rival flagship machines from 2020. Therefore, the Switch's hardware truly cost a lot, and the price of just over 2,000 is truly unprofitable.
However, this is also industry practice. Whether it's Sony, Nintendo, or Microsoft, they all adopt the strategy of making consoles as cheap as possible, selling them as long as they don't lose money, and then pinning their hopes of making money on game cartridges.
After all, if you've already spent over 2,000 to buy a game console, wouldn't it be a waste if you didn't buy several thousand worth of games?
The price of a game console is around 30,000 yen, and a single game sells for 5,000 yen. With six games, you could recoup the cost of one game console. Do you think game cartridges are profitable or not?
And now, Nintendo's predicament is also reflected in game cartridges.
Suppose Nintendo and Sony simultaneously release a game, and the profit expected by the platform and third-party game developers from this game is 4,000 yen. Then, setting aside game development costs, the remaining cost is the cost of producing the game cartridge.
At this point, PlayStation universally uses optical discs as the medium for its games, while Nintendo still uses its proprietary cartridges.
Currently, the size of a top-tier AAA game is generally between 500MB and 1GB. Even on a handheld, it's between 100-300MB. Let's calculate based on the minimum standards of 500MB and 100MB.
For an optical disc, 500MB is a trivial amount of data. One optical disc is enough to hold the entire game, with a duplication cost of no more than 80 yen, which is about less than one RMB. Adding game packaging and other costs, the production cost of a game cartridge would be at most 200 yen, making the selling price of such a game 4,200 yen.
However, for Nintendo's game cartridges, compared to current technology, the production cost of a 500MB game cartridge is at least around 1,500 yen. Adding various packaging costs, it reaches nearly 1,600 yen. Therefore, the selling price of this game cartridge would be as high as 5,600 yen.
Thus, for games of the same quality, players would have to pay 1,400 yen more to buy games on the Nintendo platform. Considering such cost factors, Nintendo either has to proactively lower its profit expectations or raise prices and lose market share.
This is one of the reasons why Nintendo has been in continuous decline since Sony's rise. It's because Nintendo's cartridge prices have remained high, even exceeding twice the price of comparable Sony games. It's no wonder players would prefer Nintendo.
In fact, everyone at Nintendo was aware of this. However, due to the suppression by the tyrant Yamauchi Hiroshi, no one dared to defy his wishes or development philosophy.
Iwata Satoshi knew that it was imperative to quickly address the issue of high production costs for Nintendo's game cartridges. Otherwise, Nintendo would continue to decline in future competition, and might even face extinction.
Especially in the handheld market, which can be considered the last refuge, it is currently facing immense competitive risks. However, handheld consoles cannot use large storage devices, and can only use advanced miniature storage chips to produce cartridges, which further increases the cost of producing game cartridges.
But the tyrant's will could not be changed. The only solution was to reduce the cost of storage chips. Originally, this problem was unsolvable. Nintendo could only continue to feign ignorance historically, surviving on the quality of its games and the stagnation of the PSP after its release.
However, Iwata Satoshi discovered Jiangnan's storage chips, which made him feel as if he had found an astonishing treasure.
Previously, they had to spend around 1,200 yen to purchase a 100MB storage chip. But now, a 100MB storage chip produced by Jiangnan was not only more stable in quality but also only cost around 900 yen. This filled Iwata Satoshi with joy and also showed him the possibility of reducing chip production costs and continuing to compete with Sony.