Sony has released a video demonstrating their next generation virtual reality finger tracking controllers which are currently under development. The video

Is there another chapter for Nintendo after the Wii? What does the future look like in terms of product, team, etc.?

1. Nintendo is Not Dying

Despite its naysayers, as the most innovative of the three remaining game console manufacturers, Nintendo’s future is still bright and promising. While other people have correctly pointed out that the Wii U has not been successful [1] despite its head start (see Figure 1 below), Nintendo is still not only profitable but has $10.5B in cash reserves [2], enough money to run $257M yearly deficits for 38 years. In addition, Nintendo has $6B in premises, equipment, and investments, and some of the most valuable video game IP for licensing (Mario, Zelda, Pokemon, etc.) if they get really desperate. In any case, as demonstrated in Figure 2, Nintendo is profitable again. It’s clear that Nintendo isn’t going away any time soon.

People on the outside love to talk about a company’s performance each Fiscal Quarter. As an engineer who has seen how many tech companies operate from the inside, including Apple, Intel, NVIDIA, and Microsoft, we couldn’t care less how a company does each quarter (aside from looking at our stock portfolio performance). Engineering timescales in computer technology are on the order of 3-5+ years from project proposal to completion. Nintendo is on similar timescales: the original Wii was conceived in 2001 and launched in 2006 [32]. The Wii U was conceived in 2008 and launched in 2012 [33]. As a result, for the success of a product, the company must predict the state of the market 5-10 years in advance. All companies take risks and release clunkers for a product generation from time to time. As long as the company isn’t in danger of becoming insolvent, poor short-term performance doesn’t matter towards the long-term success of a company. However, it’s when a company consistently doesn’t learn from their mistakes each product generation and continually fails to execute that its future is in jeopardy. Nintendo hasn’t demonstrated this at all: the last-generation Wii and DS were all monumental successes.

Figure 1. Nintendo Wii U Total Sales Over Time

Figure 2. Nintendo Quarterly Net Income Over Time [3]

1.1. Nintendo Revenue Breakdown

Some people have stated that because Nintendo hasn’t had much success in consoles since the original Wii, that their future looks bleak. This is simply distorting the facts. Nintendo’s main product by revenue is not in consoles and console gaming. Would Nintendo like for consoles to be their main product? Sure. But the fact remains that for more than the last decade (with the exception of a brief period of time during 2009-2010), Nintendo’s hardware and software revenues have been dominated by handheld devices. In fact, it’s well-known that unlike Microsoft or Sony, Nintendo generally makes profit on their hardware. Other companies use consoles as loss leaders and make their profits on high software margins. However, unfortunately for Nintendo, they had to sell the 3DS and Wii U initially at a loss, although they were able to rectify the issue with both [30] [31].

Figure 2.1. Nintendo Hardware vs Software Revenue Breakdown Over Time [29]

Figure 2.1. Nintendo Hardware Revenue Breakdown Over Time [29]

Figure 2.2. Nintendo Software Revenue Breakdown Over Time [29]

Figure 2.3. Nintendo Gross Profit Ratio Over Time [29]

2. The Future of Nintendo: The Short Term

What sort of products will Nintendo develop in the near-future? The most obvious is Nintendo’s next-generation system, the Nintendo NX, due to launch late this year. In a recent interview with Time Magazine [4], new Nintendo president Tatsumi Kimishima made the following declarations:

  • Nintendo shouldn’t blindly port its IP onto mobile devices. While Nintendo wishes to increase access to its IP, it won’t be putting everything on smartphones any time soon. Rumors regarding Nintendo quitting consoles and going smartphone-only are false.
  • Nintendo will unify its properties across all platforms with My Nintendo and Nintendo Account. A key starting feature is Nintendo Points, which can be redeemed for digital content and original goods [5]. The new iOS/Android smartphone app Miitomo is a key part of this [6], which allows for social interaction through the ever-popular Nintendo Mii avatars.
  • Nintendo NX will be unique and different. It will not be the next iteration of the Wii or Wii U. Nintendo learned its lessons from Wii U, in which it was hard to convince its existing Wii userbase to upgrade to something incremental.

2.1. The Nintendo NX

Unfortunately, Nintendo has not said much about NX, preferring to keep it a surprise. Fortunately, there have been quite a few rumors and leaks, enough for us to make some fairly concrete predictions. Bear in mind that despite the number of rumors that have come out, many are false so good judgement is needed.

Many of the answerers for this question are affiliated with the game industry and probably cannot comment on rumors due to NDAs. However, as an outsider I am unrestricted and can comment and speculate freely. As an avid hardware enthusiast and PhD student in computer architecture, I have traced the rumors to their source and determined what I feel to be credible. The following sections are the result of compiling tens if not hundreds of different rumors and tidbits found on various websites and forums.

2.1.1. The NX Controller

From the classic SNES controller, to the multi-positional batarang-style Nintendo 64 controller, to the Wiimote and Wii U gamepad, Nintendo has always innovated with the controller. Thus, most of the popular speculation is regarding what the NX controller will look like.

Pretty much everyone has already seen the Nintendo patents, so lets quickly summarize. A patent Nintendo filed in 2015 describes a unique and highly customizable touchscreen controller shown in Figure 3, which people speculate could be a precursor to the NX controller. Nintendo describes a method to solve the current issues plaguing touchscreen controllers, namely the lack of physical button/joystick feedback from pure touchscreen controllers, and the awkwardness of reaching back and forth between physical buttons and the touchscreen. The controller is an innovative handheld that tightly integrates embedded analog sticks with a surrounding oval touchscreen that reaches to the very edge of the device. Distance between physical buttons and the touchscreen is minimized, and the size of the touchscreen provides for more immersion.

While many patent filings are to explore ideas and cover their bases, this technology seems fairly practical. Nintendo is rumored to be one of Sharp’s first customers for its LCD FreeForm Technology shown in Figure 4, which can be cut into any arbitrary shape and allows for precisely this sort of display [8]. Supposedly, Nintendo is looking for a donut-shaped display with a hole in the middle presumably for buttons.

Figure 3. Nintendo’s Patented Touchscreen Controller

Figure 4. Sharp’s FreeForm Display Technology

2.1.2. The Nintendo NX Hardware Specifications

Less-discussed are the hardware specifications for the Nintendo NX. After the failure of the GameCube, Nintendo has refrained from competing on sheer hardware horsepower, instead choosing to release cheaper and lower-power hardware such as the Wii and Wii U. Rumors state that NX is the name for the unified mobile and console gaming systems [20]. I will only be considering the console gaming system for these specifications.

This time around, there is one massive change: Nintendo is very likely switching from IBM PowerPC to x86. This is huge, as it allows game developers to quickly port games from XBox and Playstation (which also use x86) to the NX. Previously, the conversion process was much more difficult. This may be the basis behind Electronic Arts rekindling their relationship with Nintendo [9].

It is well-known that Advanced Micro Devices (AMD) builds the semi-custom processors (both processors and graphics) present in both the XBox One and Playstation 4. From the GameCube to the Wii and Wii U, while Nintendo has used AMD graphics, they have gone with the same virtually-identical PowerPC 750 processor. However, AMD recently announced that they gained two more semi-custom design wins. It is rumored that one is an ARM-based processor for Facebook, and the other is an x86-based processor for Nintendo NX [10].

A leaked screenshot of a Nintendo insider survey, shown in Figure 5, shows that Nintendo is targeting 900p/60fps for their NX console. While XBox One and Playstation 4 claim to target 1080p/60fps, many AAA games with intensive graphics, such as The Witcher 3, can only run at 900p/30fps or 1080p/30fps [11]. Therefore, we can expect overall performance to be at least equal to that of the XBox One.

There has been an especially interesting rumor from a very credible source: the Wall Street Journal’s tech reporter Takashi Mochizuki. In email correspondence with forumgoers, Mochizuki states unequivocally that Several people who said who have seen a [NX] demo said what they saw is impossible to run on a computer without a “industry-leading” or “cutting-edge” chips“, and that NX development kits contain leading-edge hardware [12]. In contrast, Wii U development kits were only ~2x faster than an XBox One [13].

Based on this information, it is possible to intelligently speculate NX hardware specifications. Figure 6 shows the high-level hardware specifications of the XBox One and Playstation along with my speculative specifications for the Nintendo NX.The XBox and Playstation have fairly similar specs, both using many low-power AMD Jaguar cores coupled with a high-end (at the time) AMD GPU. Microsoft tried to save money with the XBox by using the cheaper and lower-bandwidth DDR3 coupled with high-bandwidth eDRAM, while Sony went all-out for performance with a more powerful GPU coupled with high-bandwidth but expensive GDDR5.  However, since then, AMD has released more efficient and powerful CPUs and GPUs. In addition, after long delays, both TSMC and GlobalFoundries have finally ironed out the kinks and gotten their latest FINFET process technology ready for mass production. Moving from TSMC 28nm to 16/14nm FINFET alone can provide 65% higher speed, 2x the density (cost reduction), or 70% less power [14]. Generally, companies choose a mix of all three.

It is very likely that Nintendo chose to use AMD’s latest low-power CPUs. These CPUs are fully-synthesizable, meaning that it’s relatively simple to manufacture them on a different process technology. The latest-version low-power CPU from AMD is called Puma+, a further refinement from their Puma core, which is 25-35% faster clock-for-clock and 2x more power efficient than Jaguar [15]. Due to the newer process technology, Nintendo may choose to clock the CPU frequency much higher than that of the XBox One or Playstation 4.

AMD has since released more efficient and powerful GPUs as well. The latest Radeon Fury X, which uses the GCN 1.2 architecture and manufactured on TSMC 28nm, contains 4096 shader cores and up to 8 TFLOPS theoretical single-precision performance [16]. This is 4-8x higher performance than the XBox One or Playstation 4. However, unlike Microsoft and Sony, Nintendo would never choose the highest-end components for their console. Therefore, 2-4 TFLOPS is much more reasonable. When manufactured on a 14/16nm FINFET process, the 598mm^2 die shrinks to 195mm^2. Cut in half or a quarter, the die would be 50mm^2 to 100mm^2, very reasonably costed while still being significantly faster than XBox One or PS4. In contrast, the Wii U “Latte” GPU die is 146mm^2 [17]. Nintendo may choose to stay with GCN 1.2, or upgrade to AMD’s upcoming GCN 2.0 architecture, Polaris, which offers significantly higher performance and power efficiency on 14nm nodes [18]. Generally, moving to a new graphics architecture further improves performance per mm^2.

The final question is memory. Nintendo has historically skimped on system DRAM, instead choosing to use only a small amount of slow DRAM coupled with a small but fast EDRAM buffer. I expect this trend to continue. Both XBox One and PS4 have 8GB of system memory. Therefore, I expect the next-generation NX console to have 4GB or, at the very most, match them with 8GB. DDR4 has recently neared the crossover price point with DDR3 [19], and with time I expect DDR4 to become cheaper than DDR3 as memory manufacturers increase DDR4 volumes. Therefore, either DDR3 or DDR4 are reasonable.

AMD has recently started using Micron’s High Bandwidth Memory technology (HBM), which offers extremely high memory bandwidth at low power, but as a new technology is very expensive. If Nintendo values power consumption (e.g. for good mobile performance), then 2 to 4GB of HBM is a distinct possibility. In addition, with such high bandwidth, there is no more need for eDRAM. However, I do not expect Nintendo to go this route.

Figure 5. Leaked Nintendo NX Survey Screenshot

Figure 6. Speculative Nintendo NX Specifications Compared to XBox and Playstation

Figure 7. Historical Nintendo Console Specifications

2.1.3. Nintendo NX Launch Titles

There are many first party titles rumored to be available at launch, including a new Super Smash Bros [21]. More interestingly, the mysterious Pokemon Go augmented reality game, announced September 2015, has been pushed back far enough to now be considered a NX launch title [22]. In addition, Pokemon Sun and Moon are announced to be launching this holiday season. A forumsgoer on NeoGAF correctly predicted the Pokemon Sun/Moon announcement as well as its internal codename of Niji, which lends credence to his other rumors. One of the biggest rumors is that a new Legend of Zelda game will be a launch title this holiday season for NX [23].

Figure 8. Nintendo Rendering of Pokemon Go

3. The Future of Nintendo: Long Term

I expect Nintendo to release consoles for many more generations past NX. While it is impossible to predict what Nintendo will do next, I think there are some general trends.

The main trend is: Nintendo loves Augmented Reality.

Let’s take a look through history at Nintendo’s various attempts at immersive game experiences.

1988: Nintendo and Bandai releases the Power Pad

The Power Pad is a floor mat game controller designed for family games and exercise [27]. It was somewhat successful, with 11 games supporting the controller. It later spawned games such as Dance Dance Revolution.

Figure 9. The Bandai Power Pad

1989: Mattel releases the Nintendo Power Glove

“I love the Power Glove. It’s so bad.”

– Lucas Barton, from “The Wizard”

Truer words have never been spoken. The Power Glove, a controller accessory for the NES, promised virtual reality mechanics but delivered imprecise and hard-to-use controls. It had finger gesture-based controls and its sonic sensors could detect pitch and yaw. Modern variants which shun the glove include Leap Motion [24] and Thalmic Labs Myo [25].

Figure 9. The Power Glove, as featured in the movie “The Wizard”

1995: Nintendo releases the Virtual Boy

The Virtual Boy was Nintendo’s first effort at producing a virtual reality game console, beating Oculus and HTC Vive by several decades. Unfortunately, the technology wasn’t there yet and the Virtual Boy, which could only display monochrome red games and caused headaches after long periods of play, was a failure. You can read more about the interesting history and technology behind the Virtual Boy here: Unraveling The Enigma Of Nintendo’s Virtual Boy, 20 Years Later

Figure 10. The Nintendo Virtual Boy

2001: The Nintendo GameCube Almost had 3D Capabilities

Before the release of the Nintendo GameCube, Nintendo internally evaluated the potential for supporting 3D content, even developing a fully-working game to go with it: Luigi’s Mansion. This was revealed by an interview with the late Nintendo President, Satoru Iwata [26]. However, after the disaster of Virtual  Boy, they realized that 3D was not yet ready for the spotlight and axed that feature.

“The Nintendo GameCube system actually had 3D-compatible circuitry built in. … It had the potential for such functions,” Iwata told an interviewer. “If you fit it with a certain accessory, it could display 3D images. … Nintendo GameCube was released in 2001, exactly 10 years ago. We’d been thinking about 3D for a long time, even back then.”

The GameCube’s 3D functionality was to be achieved with a special liquid crystal display that would have been sold separately. However, due to the cost of LCD screens at the time, the peripheral was deemed too expensive and never made it past the prototype phase.

“We couldn’t have done it without selling it for a price far above that of the Nintendo GameCube system, itself!” remarked Iwata. “We already had a game for it, though–Luigi’s Mansion, simultaneously released with Nintendo GameCube. … We had a functional version of that in 3D.”

2005: Nintendo Reveals the Wii Remote

Nintendo revolutionized the gaming industry with the reveal of the Wii Remote, a split controller with embedded 3-axis accelerometers to track controller movement. An embedded optical sensor combined with a sensor bar enabled the system to determine where the controller was pointed. Nintendo later released the MotionPlus accessory, which adds a gyroscope for more accurate controller positioning.

Unfortunately, the colloquially termed Wii-mote never truly took off. While first-party games made effective use of the device, third-party games never were able to use it effectively. Still, the Wii Remote and Nunchuk combined to sell over 8.5 million units in the United States, and took the top two spots in video game accessories sales in 2006. In the U.S., the Nunchuk was the best-selling video game hardware for January 2008, with 375,000 units sold, in a month where the Wii was the best-selling console with 274,000 units sold [28].

Figure 11. The Wiimote and Nunchuck

2010: Nintendo Finally Releases a Successful 3D Product: the 3DS

After several attempts, Nintendo finally released a successful mainstream product with stereoscopic 3D technology: the Nintendo 3DS. The device, with a touchscreen bottom panel and 3D top panel, enabled 3D vision without the use of special glasses through the use of a parallax barrier. The New 3DS improved this with camera-aided head tracking to increase the field of view for the 3D effect.

Figure 12. The Nintendo 3DS with Stereoscopic Display

3.1. What’s Next for Nintendo

Throughout its history, Nintendo has been constantly exploring innovative new input devices and display technologies. I expect this to continue. Nintendo has already greatly influenced the gaming industry, including the fledgling Virtual Reality industry. For example, Figure 13 shows the HTC Vive. To some degree, doesn’t the headset resemble the Virtual Boy and the controllers resemble the Wiimote?

I completely expect Nintendo to eventually make a massive push at the cutting-edge of Virtual Reality. They have done so in the past, and will surely do so in the future. However, they have learned lessons from consoles such as the Virtual Boy and will only step in when they feel the time is right. It’s probably not right for this upcoming console generation, but who knows what the future will hold for Nintendo.

Figure 13. The HTC Vive Virtual Reality Gaming Device

[1] PS4 vs Xbox One vs Wii U Global Lifetime Sales – October 2015 Update

[2] Nintendo has enough cash in the bank to run a deficit for 38 years

[3] Nintendo Net Income (Quarterly) (NTDOY)

[4] Nintendo President Tatsumi Kimishima on the Future

[5] Nintendo details My Nintendo points program

[6] Miitomo | Nintendo

[7] GAME APPARATUS AND INFORMATION PROCESSING APPARATUS

[8] These are the amazing ‘free-form’ displays that Nintendo may be using

[9] Rumour: EA And Nintendo Looking To Rekindle “Unprecedented Partnership” On NX

[10] More hints that AMD is building Nintendo NX’s processor

[11] The Witcher 3 Running 900p, 30fps On Xbox One, 1080p At 30fps On PS4 | CINEMABLEND

[12] Nintendo NX Tech Demo needs “Cutting Edge Chips” to run on PC

[13] Final version of Wii U dev kit has shipped to developers?

[14] Taiwan Semiconductor Manufacturing Company Limited

[15] AMD: The New Puma Chip As A Catalyst In Mobile

[16] The AMD Radeon R9 Fury X Review: Aiming For the Top

[17] WiiU “Latte” GPU Die Photo – GPU Feature Set And Power Analysis

[18] AMD’s new graphics architecture is called Polaris

[19] Price Check: Price Gap Between DDR3 and DDR4 Memory Almost Gone

[20] The Nintendo NX will reportedly be a powerful mobile-console hybrid

[21] Dr. Serkan Toto on Twitter

[22] Pokemon GO to run on Nintendo NX?

[23] Rumor: 3DS 2016 plans leaked, The Legend of Zelda Wii U an NX holiday 2016 launch title

[24] Leap Motion

[25] Myo Gesture Control Armband

[26] GameCube almost had 3D functionality

[27] Power Pad

[28] Wii Remote

[29] A Deeper Analysis of Nintendo’s Financials – Why They Can’t Drop Hardware

[30] Nintendo No Longer Losing Money on 3DS Hardware Sales

[31] Nintendo: Wii U No Longer Sold At A Loss

[32] Wii

[33] Wii U