TOKYO Shares in Nintendo Co Ltd fell nearly 7%, putting them on track for their biggest one-day drop in a year on Wednesday after the Japanese videogame giant cut its annual sales projection for its Switch console by nearly 10%.

The Kyoto-based company on Tuesday cut its sales forecast for the Switch to 19 million units for this business year from 21 million, as microchip shortages constrained production.

That was in contrast to Sony Group Corp, which this month signalled that supply chain snarls that hampered its games business were easing.

Nintendo President Shuntaro Furukawa told an earnings briefing on Tuesday that chip supply had begun recovering in recent months, helping boost Switch production. The industry is heading into the crucial year-end shopping season.

Still, Nintendo shares were down 6.9% in Tokyo trade, against a nearly flat broader market. That put them on track for their biggest one-day drop since October 2021.

"The Switch hardware cycle peaked (in the last financial year) and we believe that revenues, profits and valuations will now struggle to reach new highs in this cycle," wrote Mark Chadwick, an independent analyst who publishes on the Smartkarma research platform.

"There aren't any more catalysts to play out before the release of the Legend of Zelda (in May 2023)," he added.

Nintendo also on Tuesday raised its annual net profit forecast thanks to a weaker yen but missed analysts' consensus forecasts.

Shares of Nintendo are up 8.3% so far this year.

(This story has been corrected to fix the direction of shares in paragraph 5)

(Reporting by Kantaro Komiya; Editing by Chang-Ran Kim and David Dolan)