Chapter 86

The plane slowly landed on the runway at Tokyo International Airport. This was Li Xuan's second visit to Japan. The first time, he was somewhat anxious, unsure if he could persuade Seiko Epson to manufacture the arcade motherboard. But now, Li Xuan was full of confidence. Oriental Electronics had just established a branch in Japan, preparing to fully enter the Japanese market.

"Let's go!" Li Xuan took Zhong Chuhong's hand and said with a smile.

"Okay!" This was Zhong Chuhong's first time on a plane and her first time abroad, and she was quite excited.

At the arrival gate, Suzuki Ichiro, the head of Oriental Electronics' Japanese branch, was already waiting respectfully. As soon as he saw Li Xuan, he bowed warmly.

"Mr. President, I have already reserved a luxury suite for you at the Imperial Hotel!"

Li Xuan and Zhong Chuhong left the airport with Suzuki Ichiro and headed to the Tokyo Imperial Hotel in Ginza. This luxurious hotel, built in 1890, is located near the Imperial Palace and is known as the symbol of Japanese hotels, often used for royal weddings. The luxury suite Suzuki Ichiro reserved for Li Xuan was on the 14th floor, offering a view of the Imperial Palace from the window.

Previously, Oriental Electronics had authorized Seiko Epson to produce and sell the Hong Kong Block and Tank Battle arcade games in Japan, so they did not immediately enter the Japanese market.

However, after Oriental Electronics was on track, the newly appointed CEO, Han Peng, immediately began to plan for the second-largest gaming market, Japan. Suzuki Ichiro was a key figure Han Peng recruited from Sega's Japanese branch, responsible for setting up the Japanese branch.

Oriental Electronics' first handheld game console, GameBoy, had been developed and would be unveiled at the upcoming Akihabara Electronics Expo. Li Xuan flew to Japan to personally oversee the event.

Before Li Xuan arrived in Japan, the Japanese branch, led by Suzuki Ichiro, had already launched a large-scale market development campaign. The company's marketing director, Ye Chengkang, had arrived in Japan a week earlier to prepare for the Akihabara Electronics Expo. This was his first major battle since joining Oriental Electronics, and he could not afford to lose.

"Xuan, isn't 5000 yen too low? At this price, we won't make much profit!"

Soon after Li Xuan arrived at the Imperial Hotel, Ye Chengkang knocked on the door, hoping to make a final plea. The original price for GameBoy in Japan was set at 5500 yen, but Li Xuan decided to lower it to 5000 yen three days ago.

"The price of 5000 yen cannot be changed. A lower price will help the game console spread quickly. Once players buy our console, they will develop loyalty, making it easier to sell game cartridges in the future."

Li Xuan smiled and said, "That's why I decided to increase the price of game cartridges from 2500 yen to 3000 yen. The profit we lose on the console can be made up from the game cartridges!"

"But there's no need to set the price so low!" Ye Chengkang shook his head and said, "We conducted market research, and 5500 yen is already quite low! A company called Nintendo just launched a handheld console similar to ours last week. The GameWatch Ball can only play a simple ball-catching game and is priced at 5800 yen, yet it has been selling very well! Our console has higher-quality games, and at 5500 yen, it would dominate the market. There's no need to lose 500 yen in profit!"

The current exchange rate was 1 USD to 250 yen. The retail price of GameBoy at 5000 yen was equivalent to 20 USD. Since the retail price was lowered, Oriental Electronics also had to reduce the factory price, which was set at 10 USD.

The manufacturing cost of the console was around 8 USD, so the gross profit was about 2 USD. After deducting sales, marketing, and other costs, the actual profit would be even lower.

However, Li Xuan was not swayed by Ye Chengkang's arguments. Li Xuan made the decision to lower the price after reviewing the competitor data collected by the Japanese branch. Nintendo's GameWatch Ball was considered the main competitor for GameBoy.

This was a simple ball game where players used two buttons to control the left and right hands of a character, bouncing balls back into the air. As time progressed, the balls would fall faster and in greater numbers. If the player failed to catch any ball, the game would end.

No one at Oriental Electronics took the company called Nintendo seriously. Although their GameWatch Ball sold well after its release, this was because GameBoy had not yet launched. Once GameBoy, with its Hong Kong Block and Tank Battle cartridges, hit the market, it would easily dominate.

But Li Xuan did not underestimate Nintendo. If his memory served him right, GameWatch sold millions of units in its early years, making it a significant cash cow. Without the competition from Oriental Electronics, Nintendo's Ball game, though simple, was a significant improvement over other LED-based handhelds on the market.

Moreover, the data Li Xuan had showed that Nintendo's financial situation was not ideal, with a debt of 1 billion yen. After the success of Taito's Space Invaders in 1978, Nintendo's president, Hiroshi Yamauchi, decided to enter the arcade market. However, several of their arcade games failed, accumulating significant debt.

Seeing an opportunity, Li Xuan realized this was the perfect time to deal a fatal blow to Nintendo. The price advantage of 5500 yen for GameBoy over 5800 yen for GameWatch was not significant, but if Oriental Electronics could lower the price to 5000 yen and leverage the popularity of Hong Kong Block and Tank Battle, it could deliver a crushing blow to the newly released GameWatch.

Oriental Electronics' GameBoy came with a Hong Kong Block cartridge and offered four additional game cartridges: Tank Battle, Snake, Highway, and Five-in-a-Row. The console was priced at 5000 yen, and each game cartridge at 3000 yen.

With a much lower price and a variety of fun games, the choice for players was almost a foregone conclusion.

If Nintendo's GameWatch failed again, their company would likely struggle even more. Li Xuan thought he could then approach Hiroshi Yamauchi to discuss the possibility of acquiring Nintendo.

Since there was an opportunity to eliminate Nintendo before they became a major player, Li Xuan would not hesitate. He would not waste time watching a competitor grow and then engage in a rivalry. A Nintendo under the control of Oriental Electronics would be the most desirable.

For this reason, Li Xuan could unhesitatingly sacrifice some of GameBoy's profit. If GameWatch also chose to lower its price under pressure from Oriental Electronics, Li Xuan would be secretly pleased. The manufacturing cost of GameBoy had already been optimized to the limit.

For example, the procurement of the console's display. Due to the price war between Sharp and Casio in recent years, Epson, one of Japan's leading LCD suppliers, was also forced to join the competition. Li Xuan only managed to secure a rock-bottom price from Epson by promising to purchase at least five million displays. He did not believe that Nintendo, with its current resources, could obtain cheaper components from Japan, so Li Xuan was not afraid of a price war.