By
Jack Schofield /
Business/
Gadgets/
Gaming 12:39pm
The PlayStation 3 may be roughly twice the price of rivals, but users are getting supercomputer power for a PC price, according to
iSuppli's teardown analysis. It's "a great bargain". The company says:
The combined materials and manufacturing cost of the PlayStation 3 is $805.85 for the model equipped with a 20Gbyte Hard Disk Drive (HDD), and $840.35 for the 60Gbyte HDD version, according to iSuppli's Teardown Analysis service's preliminary estimate of expenses in the fourth quarter. This total doesn't include additional costs for elements including the controller, cables and packaging.
At these costs, Sony is taking a considerable loss on each PlayStation 3 sold. Materials and manufacturing costs for the 20Gbyte model exceed the suggested retail price of $499 by a total of $306.85, iSuppli's Teardown Analysis service estimates. For the 60Gbyte version, costs exceed the $599 price by $241.35.
Sony's losses per unit are dramatically higher than Microsoft's on the Xbox 360. iSuppli says:
In contrast, the HDD-equipped Xbox 360 has a manufacturing and materials total of $323.30, based on an updated estimate using costs in the fourth quarter of 2006. This total is $75.70 less than the $399 suggested retail price of the Xbox 360.
Comment: I suspect Sony's financial loss is much larger than iSuppli suggests. iSuppli is costing the Cell processor at $89, which looks utterly ludicrous to me. Presumably it's not counting the couple of billion dollars Sony has sunk into Cell development and manufacturing, and it may be overestimating the manufacturing yields, which could be low enough to double the real price per chip. But even without those factors, the $89 price looks out of line with the cost of equivalent silicon from Intel or AMD. I'd therefore add at least $51 to the Cell price, bringing the loss on a 20GB PS3 to $357.85.
Also, iSuppli's estimate of $125 for a Blu-ray drive looks low, though clearly this component will become dramatically cheaper
if the supply of blue lasers improves and supply ramps up.
Of course, the factory price also doesn't include distribution, advertising and marketing costs, and the retailer margin. When a dealer sells a PS3 for $500 or $600, Sony only gets a proportion of that.
Considering the development and marketing costs, I reckon it's costing Sony at least $1,000 to sell a PS3 for $500. So if it sells 6 million units, that's an attractive loss of $3 billion.
Some of that money is already sunk costs, of course, with development spread out over the past six years. Still, the expectation that Sony will lose $1 billion on the PS3 in the first year may turn out to be low. And unless users buy lots of high priced games, Sony may take a long time to get that money back.
