Nintendo's biggest ROM chip supplier is bowing out of the business

What happened

Macronix said in its third-quarter earnings report that its ROM chip production "has reached its end." The company says it will slowly stop working in the game industry. Analyst David Gibson says Macronix is Nintendo's main memory chip maker for physical game cartridges, so this could cause problems for Nintendo.

Key numbers

• ROM production shrank 39 percent in the last year.
• ROM now makes up just 5 percent of Macronix's business.
• Macronix's production capacity is stuck at 25,000 12-inch wafers a month.
• Planned new capacity costs $1.2 billion and takes a year or more to start up.

Why ROM chips are being pushed out

A ROM chip stores data that does not change, such as a game. The AI industry needs huge amounts of memory and storage. That demand has raised prices and cut supply for many computer parts. Macronix's factory space, called wafer space, is limited. Other chips, such as NOR and NAND memory, earn more money, so the company is using its space to make them instead.

Why it matters

Nintendo Switch and Switch 2 physical games rely on ROM chips. If Macronix stops making them, Nintendo may have trouble finding enough chips for cartridges. This shows how the AI boom can affect products far outside of AI, like video games.

What to watch

• Whether Nintendo finds a new chip supplier for game cartridges.
• How fast Macronix moves away from the game industry.
• Whether cartridge supply or prices change for Switch and Switch 2 games.