Chip Stocks Win With Wii

Less than a day after Nintendo's (NTDOY) Wii made its debut in North America, Gregory Quirk, a technical marketing manager for Semiconductor Insights, a firm that offers technical analysis of hardware, bought the console just to take it apart.

Quirk and his team were curious to see the insides of the Wii, searching for the chips and the components that would power the machine.

"One of the most interesting things for us was how relatively noncomplex it was compared to the PlayStation 3 and Xbox 360," says Quirk. "The board on the Wii is relatively simple and doesn't have the same number of components as the other consoles."

Inside the box were names such as Analog Devices (ADI) and ST Microelectronics(STM), both of which supply the sensors in the console's remote that enable and interactive feeling when playing the game; Broadcom(BRCM), whose Wi-Fi chips connect the Wii remote (wirelessly) to the screen; and memory chipmaker Qimonda(QI).

It was much fewer components than what a Sony(SNE) PS3 or a Microsoft(MSFT) Xbox 360 sported.

Still Quirk and his team were intrigued because it offered an opportunity to look at companies that could end up flying high on the coat tails of the Wii.

In less than five months since its introduction in November, Nintendo sold 5.84 million devices and has forecast sales of 14 million systems for the fiscal ending April 31, 2008.

If Nintendo meets and exceeds expectations with the Wii, the potential upside for these suppliers in the Wii ecosystem could be big, say some experts.

The Wii could eventually account for 40% to 45% of all hardware sales for this generation, Nintendo executives have said.

That could translate into 40 million to 50 million units sold throughout the life of this console cycle, says Roger Ehrenberg, president of financial intelligence firm Monitor 110. Ehrenberg, who follows the games sector closely, does not own stocks in any of the gaming or chip companies mentioned in the story.