El Segundo, Calif.— With the introduction of the PlayStation 4, Sony is closer to profitability with component and manufacturing costs starting lower than its price tag, after taking a loss on many revisions of its PlayStation 3 console, according to preliminary results from the Teardown Analysis Service at IHS Inc. This is even with performance upgrades in the processor and memory subsystem.
The bill of materials (BOM) for the PlayStation 4 totals $372 and when manufacturing costs are added the cost increases to $381, said IHS. This is $18 less than the $399 retail price for the console. However, Sony will initially take a loss on each console sold when other expenses are added, said IHS. Analysts at IHS expect Sony to break-even or reach profitability in the future as hardware costs decrease as part of normal declines.
“When Sony rolled out the original model of the PlayStation 3 in 2006, our teardown analysis revealed that the console delivered supercomputer-class performance at a price equivalent to a notebook PC,” said Andrew Rassweiler, senior director, cost benchmarking services for IHS, in a statement. “However, this achievement came with a major downside for Sony, as the BOM costs for most of the different versions of the console were in excess of the retail prices, in some cases by more than $100. Although Sony brought the PlayStation 3’s costs down significantly during its lifetime, the company’s intent was never to make money on the hardware, but rather to profit through sales of games and content.”
“This time, Sony is on a greatly shortened path to the hardware break-even point, or even profitability, with its cost-conscious PlayStation 4 design," stated Rassweiler. "The company is pulling off this feat, despite offering a brand-new design that once again includes avant-garde components that yield superfast performance. The PlayStation 4 keeps a lid on costs by focusing all the additional expense on the processor and memory—and reducing outlays for the optical drive, the hard disk drive (HDD) and other subsystems."
The teardown reveals that the most expensive subsystems in the PlayStation 4 are the core processor and the associated graphic dynamic random access memory (DRAM). Together, they're priced at $188, representing slightly more than 50 percent of the console's BOM, compared to 29 percent for the fourth-generation PlayStation 3.
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Sony has integrated the core central processing unit (CPU) and graphics processing unit (GPU) that were previously two discrete ICs, said IHS. The Advanced Micro Devices Inc. (AMD) processor includes an eight-core Jaguar CPU and a Radeon GPU. IHS estimates this processor costs $100.00, compared to $83.55 for equivalent ICs from IBM and Nvidia that were used in the PlayStation 3.
“Sony clearly has made the decision to focus on balancing the brains and economics of the console, with the processor and memory dominating both the design and the BOM,” said Jordan Selburn, senior principal analyst for consumer platforms at IHS, in a statement. “This processor is a monster, with the surface area of the chip amounting to about 350 square millimeters. That is three times larger than any other chip manufactured using equivalent-process technology that has been examined by the IHS Teardown Analysis service. Despite the remarkable silicon acreage of this device, it comes at a price point attractive to mainstream consumers while delivering a very high level of performance. Future versions, manufactured with even more advanced semiconductor processing technology, will further enhance both cost and performance.”
The cost also more significantly increased for the DRAM thanks to the adoption of advanced Graphics DRAM (GDRAM) GDDR5. At an estimated cost of $88.00, it's up from only $9.80 for the fourth-generation PlayStation 3. However, IHS said the $9.80 total does not include the DRAM that was mounted directly to the Nvidia processor in the PlayStation 3.
Sony also was able to lower or maintain costs for other subsystems, said IHS. The biggest cost reduction was achieved in the optical drive, dropping from $66 for the CECH-2001A PlayStation 3 to $28 for the PlayStation 4. The hard disk drive in the PlayStation 4 costs $1 less than the CECH-2001A despite an increase in capacity from 120 GB to 500 GB due to falling prices for HDDs.
The manufacturer also cut another $10 from the BOM by using a more integrated design, said IHS. This allowed Sony to cut the number of small-sized ICs, discrete semiconductors, and passive components. Another $5 was cut from the mechanical portion of the design.
IHS' preliminary teardown assessment accounts for only hardware and manufacturing costs, and does not include other expenses such as software, licensing, royalties or other expenditures.