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TOKYO—Nintendo’s new Switch 2 videogame machine uses a rare-earth magnet to attach its hand-held controllers to the main console, according to a teardown, highlighting the company’s vulnerability to potential Chinese supply-chain disruptions.
Nintendo’s Switch 2, which starts at $450 in the U.S., has had a strong debut, with global sales surpassing 3.5 million units in the four days following its introduction in June. Nintendo’s stock is up 37% this year.
People familiar with the Switch supply chain said Nintendo has moved some production of the device to Vietnam from China to limit the effect of U.S. tariffs. President Trump recently said he was setting the tariff on Vietnamese goods at 20%, while analysts estimate the average tariff on Chinese goods at around 40% to 50%.
The magnet for the controllers offers an example where reducing reliance on China isn’t easy. For the moment, Beijing has relaxed its rare-earth export restrictions as part of a truce with the U.S., but it could swiftly reinstate them if the U.S. raises tariffs again.
Switch machines feature hand-held controllers called Joy-Cons that can be detached from the main console and used wirelessly. In the first Switch, introduced in 2017, the Joy-Cons physically slid and locked into rails on the main console.
The Switch 2, by contrast, uses neodymium-based magnets to hold the Joy-Cons in place when they are attached, according to a report that technology research firms iFixit and Evident shared with The Wall Street Journal. Neodymium is a rare-earth element.
Such magnets are primarily produced in China, the leader in rare-earth refining. Nintendo declined to comment.
China’s current export-control regime encourages companies to produce full components in China. That is because the export of rare earths themselves or magnets containing them must receive a license, while larger components with the magnets inside—such as speakers, headphones or game controllers—are exempt from that requirement.
By making it harder to export rare earths and easier to export full components, the Chinese regulations have impeded efforts to establish a more comprehensive manufacturing ecosystem in countries such as Vietnam, according to people familiar with Nintendo’s supply chain.
“Rare-earth export controls will likely remain a key bargaining chip for China in its trade negotiations with the U.S.,” said Ming-Chi Kuo, an analyst with TF International Securities.
While companies can apply for export permits from the Chinese government, “many are increasingly opting to reduce geopolitical uncertainty by having rare-earth components processed in China before export,” Kuo said.
