Please ensure Javascript is enabled for purposes of website accessibility

3 Winners From the Nintendo Switch Teardown

By Ashraf Eassa - Mar 8, 2017 at 1:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Three chipmakers stand to profit if this new game console sells well.

Struggling gaming giant Nintendo (NTDOY 0.52%) recently released its next-gen gaming platform, known as the Nintendo Switch. The device has seen lukewarm reviews in the tech press, with IGN saying that the Switch is a "jack of many trades, but a master of none" and PC Advisor praising its design and versatility but criticizing its "Joy-Con performance problems, limited software, and expensive accessories."

At this point, it's probably too early to tell how the device will do in the marketplace (though, frankly, my hopes aren't high). However, should the product ultimately perform well, here are three suppliers -- revealed in iFixit's recent teardown of a Nintendo Switch -- that could potentially benefit.

An individual using the Nintendo Switch console.

Image source: Nintendo.

The brains of the Nintendo Switch come from...

The biggest potential winner from the Switch is graphics specialist NVIDIA (NVDA 0.13%). NVIDIA has done extremely well for itself in the lucrative market for stand-alone graphics processors targeted at gaming personal computers, but it has been largely absent from the game console market for quite some time.

Inside of the Nintendo Switch is an applications processor developed by NVIDIA. Not too much is known about the chip itself (though it is said to be a derivative of the company's Tegra X1 processor), but for every Nintendo Switch that gets sold, NVIDIA will generate some revenue and, presumably, a reasonable amount of gross profit.

Though a more extensive teardown will be required to verify the following, Taiwan Semiconductor Manufacturing Company may also be a winner here as it is likely the contract chip manufacturer for the NVIDIA chip design (since the Tegra X1 is manufactured by TSMC). A teardown of the chip itself by the likes of Chipworks will be required to confirm this, though.

Memory sourced from South Korea

The iFixit teardown shows that the Nintendo Switch includes DRAM -- that is, the main system memory -- built by South Korean memory giant Samsung (NASDAQOTH: SSNLF).

Now, the Switch apparently comes with two 2-gigabyte memory chips for a total of 4 gigabytes of modern LPDDR4 memory. LPDDR4 is the memory type currently in use in premium smartphones, and high-end smartphones these days have between 2 and 6 gigabytes, so the memory content inside of the Nintendo Switch is essentially equivalent to that of a reasonably high-end smartphone.

This is by no means a game-changing win for Samsung, which generated 34.29 trillion Korean won (equivalent to about $30 billion in U.S. dollars) in memory revenue (this includes both DRAM and NAND flash), but every bit helps.

Would the real Wi-Fi supplier stand up?

The iFixit teardown shows that the Wi-Fi chip is a chip known as the BCM4356. The chip's part number indicates that it's a Broadcom (AVGO -2.57%) chip design, but iFixit lists it as a Broadcom/Cypress Semiconductor (CY) part.

As it turns out, the BCM4356 was part of Broadcom's Internet of Things (IoT) lineup. Broadcom sold its IoT business to Cypress Semiconductor in the middle of last year, so it's not Broadcom that gets the win here -- it's Cypress Semiconductor.

By way of reference, though the chip was called the BCM4356 by Broadcom, it has been rebranded as the CYW4356 by Cypress.

When the transaction to sell Broadcom's IoT business to Cypress was announced, the companies said that this business unit "generated $189 million in revenue during the last twelve months." 

If Cypress is selling these chips to Nintendo for perhaps $5-$10 a piece, then significant Nintendo Switch unit shipments could translate into real revenue growth for this business. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

NVIDIA Corporation Stock Quote
NVIDIA Corporation
NVDA
$145.42 (0.13%) $0.19
Cypress Semiconductor Corporation Stock Quote
Cypress Semiconductor Corporation
CY
Broadcom Limited Stock Quote
Broadcom Limited
AVGO
$465.56 (-2.57%) $-12.28
Nintendo Co., Ltd. Stock Quote
Nintendo Co., Ltd.
NTDOY
$53.48 (0.52%) $0.28

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.