Megachips Corporation posted steep declines across all financial metrics in its fiscal first quarter, raising questions about the sustainability of its Nintendo-dependent business model.
The Osaka-based semiconductor designer reported revenue of ¥6.49 billion ($44.0 million) for the three months ended June, down 32.8% from the previous year. The company swung to an operating loss of ¥389 million ($2.6 million) compared with an ¥874 million profit a year earlier. Net losses reached ¥575 million ($3.9 million), a dramatic reversal from the ¥2.19 billion profit recorded in the same period last year.
Megachips attributed the decline to reduced demand in its amusement business, which primarily involves supplying custom memory and processing chips for Nintendo’s gaming systems. The company acknowledges significant concentration risk, noting that Nintendo represents an increasing percentage of its sales.
Despite the poor quarterly showing, Megachips maintained an optimistic full-year outlook, projecting revenue of ¥42 billion ($284.7 million) and operating profit of ¥3 billion ($20.3 million) for fiscal 2026. The forecast implies a remarkable turnaround, with operating margins expected to jump from negative territory to over 7%.
The company has emphasized securing business for Nintendo’s “next-generation game console,” though the timing and success of such efforts remain uncertain. Megachips operates as a fabless manufacturer, outsourcing production primarily to Taiwan-based foundries, which adds supply chain complexity to its Nintendo dependence.
The dramatic quarterly decline underscores the volatility inherent in Megachips’ concentration on gaming hardware, where product cycles and consumer demand can shift rapidly.
