Teardown of Sony's PlayStation 3

According to iSuppli, the device costs significantly less to build than when it was first released in 2006, and is nearing break-even

One of the great articles of faith in the consumer electronics industry might be stated thusly: "Time heals all costs."

Basically it means that over time the parts used to make a popular product will become less expensive, or that two parts might be combined into one, or that better parts will become available at the same cost and so improve the product.

And it's proving to be true for Sony (SNE) and its flagship gaming system, the two-year-old PlayStation 3. According to a teardown analysis of the latest generation of the product conducted by the research firm iSuppli, the device now costs significantly less to build than it did when it was first released in 2006.

[MURKERR]

would be amazing,price drops always spark a surge coupled with what the majority (un-fanboys) consider the best console game 'graphically' to date....that would help ps3 gain some serious momentum

[TheHater]

these parts will get cheaper which would lead to a price cut. I guess that March price cut rumor might be base on reality after all.

[Danja]

I really hope they do a price drop on the exact same day KZ2 launches....that would just be huge...

[IdleLeeSiuLung]

Actually, I find this disturbing because I thought that Sony is at a break even point by now for the PS3. Instead they are still loosing money on each console sold, and that probably doesn't take into account packaging, transportation, retailer profit and other costs of doing business (such as defective returns, technical support...)

If this is correct, a price cut will only happen because Sony is desperate to gain more marketshare or should I say to prevent continued erosion of marketshare.

[N4360G]

A price drop would cause PS3 sales to skyrocket instantly.It would be awesome if SONY cut the price of the PS3 around the same time Killzone 2 is released early next year.

[PoSTedUP]

whats the percentage you guys make off of sonys ps3? im guessing like 15% judging from how concerned yall are about ps3's sales n all.

[Lombax]

ok... listen up...

The more PS3s out there = more publisher interest = more games, hopefully exclusive so it takes advantage of the hardware. And a big install base helps to make a large profit of an exclusive. Get it?

Now go tell all the other $%#@*& idiots what I just told you. So I never have to see that argument EVER again. >.<

[Willio]

PostedUp's comments was obviously sarcastic. No need to be offended just because the console sales affect your stockholdings.

[The Killer]

states from sony PRs that the ps3 40GB is somewhere at ~$400 and that was last year november!!

does anybody think can trick me and some normal not stupid people that the ps3 still cost as much as 1 years ago??

i think when sony said BREAK-EVEN they meant to gain the money that they lost from each console sold at $600 when it cost $800 NOT that it should cost $400 to BREAK-EVEN!!

i believe ps3 is selling at profit for many months + software sales it is getting closer at BREAK-EVEN which sony lost in the first year of launch!! THATS the thing which they talk about BREAK-EVEN NOT to reach $400 cost per console!!

[ultimolu]

I smelled that a mile away dude.

This is just like the PS2. The system will gradually come down in price once Sony breaks even.

IdleLeeSiuLung: I don't see that pricecut as being desperate for marketshare. :/

[IdleLeeSiuLung]

I kind of expected all the disagrees when I say something negative about PS3 regardless if it makes sense or not.

A business will rarely drop price on a product other than, trying to get more marketshare in hope of upselling or getting more business or they are dropping it to make themselves more competitive. If the article is correct and Sony drops the price, it means the PS3 isn't selling well enough at the current price and they have to drop it to increase demand. It is pretty obvious stuff.

For any business, a price drop is the last thing they do unless they have a business plan in place to reap that benefit later. Unfortunately for Sony, they can't afford that at the moment... so they will only drop the price if there is no other way to bring value to consumers. This is evident by Sony trying to create a new SKU with 160GB hard drive, that really doesn't offer any more value than the current 80GB at a higher price tag.

So take your pick, desperate or planned? My money is on desperate move to become more competitive... If it was planned it would have been in time for the biggest shopping season of the year, namely Christmas.

edit: my point is basically, a business will drop its price only if it overall increases sales profit. If you are loosing money, and you drop the price to increase sales, you are increasing losses. The only explanation for that is, desperate move to not loose a foothold in the market. Sony is still doing good, considering they haven't dropped their prices yet and PS3's are still selling.

[ultimolu]

...Except they haven't dropped their prices.
Sony knows what they're doing. They've been at this for years. I think they will drop the price when people least expects it.

Anyway, nice analysis.

[PirateThom]

Funny enough, I got a ton of disagrees once for saying the PS3 was either about to break even if not in profit.

Not to mention, iSuppli don't take into account the fact Sony get these items in discounted rates in bulk, it would be potential "off the shelf" costs, if you built one yourself.

[Danja]

I've said it a few times also and I got tons of dis-agrees when I stated Sony will be breaking even by early 2009 the latest.

plus as you mentioned they most likely get there parts at wholesales prices since they're buying them bulks...

[rhood022]

I actually remember an article from earlier in January 2008 that said the cost to manufacture a PS3 had cut in half..

It was a "Business Week" article:

The article quotes Nikko Citigroup analyst Kota Ezawa, who stated that each PlayStation 3 now costs approximately US$400 to make, as opposed to US$800 at its US launch.

So take that for what you will. Especially since there has been several size reductions and cost-cutting measures since January.

[Death]

is you have been able to figure out these isupply estimates are high because they haven't figured out how to adjust the prices for bulk sales? What do you think they call Radioshack for prices? This is a company that analyzes production costs and sells the research as a business.

Save your "I told you so's" for next year. If they are losing $50 per console today, they were losing more when you claimed they were making a profit. Sony has cited on numerous financial statements that there lack of profit is due in part to the losses from high production costs for the PS3. This is two sources now that claim Sony loses money on each console sold. This is also normal for consoles this early in their lifespan.

-Death

[The gaming GOD]

Granted, the ps3 might even be making profit by now considering gains from the ps2 and the psp can't overshadow losses from the ps3. So when you keep in mind that the gaming division has been making profit for the last two quarters, it might be possible that the ps3 is making profit.

But back to the article. I told people for a long time now that the ps3 is a very different machine from when it was first launched. The shrinking of chips. The combining of parts. The stripping of parts. The refining of the blu laser. These are all things people constantly disagreed with me about. THESE are the reasons the ps3 was able to drop the price. And yes, as the parts become less expensive, the system will drop in price again.

This article is just stating common sense.

[Death]

As production costs for the PS3 have come down, so have profits from declining PS2 sales. This is why Sony hasn't been making money in their games division. As software sales increase and the PS3 gains a stronger foot hold this should change. I expect the game division to start making a consistant profit by the end of 2009 unless the world economy makes a bigger impact on game sales.

-Death

[The gaming GOD]

But what I was saying the comparison of what it costs to make the system compared to what it sells for. Per system sold, it's still a net gain for the ps2.

Whatever the case, Sony's game division posted profit just this past quarter and the quarter before it.

[Danja]

except that Sony is making money in there games division I dont know where you got that info that Sony's Game division isn't making money

did you also forget about the PSP..?

[Death]

First quarter (Jul 2007-sept 2007) was the seventh consequtive quarterly loss for the games division. http://www.iht.com/articles...

Second quarter (Oct 2007- Dec 2007) showed a profit http://www.guardian.co.uk/b...

Here is the 3rd quarter fiscal 2008. (Jan 2008-March 2008) (loss) http://technorati.com/posts...

The fourth quarter (April 2008-June 2008) showed a small profit, but the year ended in a loss.

Fiscal 2008 (July 07-June 08) showed a loss for the year. http://vgsales.wikia.com/wi...

First quarter of fiscal 2009 (July 2008-Sept 2008) http://www.joystiq.com/2008...

-Death

[PimpHandHappy]

over time things get cheaper

you know Sony thought about the long term when they make a machine so much more "GREEN" then everyone else

cures cancer
helps us understand black holes
or some say "time travel"
they give you free stuff

Just wait till year 5 when it hits $199

[akaFullMetal]

nice, and even making the ps3 more "Green" , is awesome.

[sonic1989]

even if the ps3 didn't make profit sony will be able to regain on what it lost on ps3 simply because 10years is more than enough.

but my opinion is that sony was losing with every ps3 sold, but now is not.

[cmrbe]

as well as the PS2 and PSP also helped SCE alot.

[DJ]

Will cost even less than the current version.

[cmrbe]

around 200. I am sure Sony would have reduced the cost of manufacturing the PS3 by now.

[YouNoob]

but they're still not giving it to their customers. and why would they as long as there are still ignorant fools who are buying that overpriced blurayplayer. not many though, as the ps3's distant 3rd place cleary shows. so there seem at least a little hope for humanity.

[evilmonkey501]

bd players do not come with a cell processor.

[Obama]

I wonder what MS uses to build their 360? My guess is a combination of recycled plastic and toilet paper.

[SONYSLAVE]

but that recycled plastic and toilet paper is still leading the PS3.

what a shame on SONY then

got to say I wonder how many droids watch anime porno all day and bash the new leader of next-gen gaming on the internet just cause their ps3rd can not get the job done when there is real competition ;-P

[Solotov]

They really need to drop the price to $350 the day Killzone 2 comes out.

[Baliw]

are already helping Sony to cut loses.

We been cuting loses since day 1 with our over-ficking-priced PS3.

So i can say without any doubt that Sony wasnt losing money NEVER EVER selling hardware.

Funny to note that production cost is now 400$ and we are paying 559$ for it.

Thats why Europe cant get a prce cut until production cost gets cheaper.

[agent864]

that is funny since your "facts" are wrong. PS3's are now retailing for 299 Euro including VAT, which translates roughly to 240 Euro w/o tax or $335 US. So the us is paying $399 without tax and anywhere up to $450 with tax depending on where it is purchased.

[Sprudling]

One store in Europe does not equal the whole of Europe.

Fact: The cheapest PS3 I'm able to find right now here in Norway is 400€ (560$). And importing the 299€ one (if it's even possible) is gonna cost me alot more than 100€.

[karlostomy]

that:

1. The ps3 is still sold at a loss
2. The price cut aint happening for a long while yet
3. The Ps3 will remain in third place due to its high cost.

[YouNoob]

1. correct
2. correct
3. it will stay 3rd due to it being an overpriced blurayplayer but not a gaming system (noobs might think it is but it really isn't).

but hey, you were 83.333% correct, that ain't bad.

[ultimolu]

And your comments prove that...

1. You are an idiot.
2. Your comments are idiotic.
3. Your lack of common sense is disturbing.
4. It seems as if you don't want Sony to profit from the PS3.
5. You did not read the article carefully.
6. Sony halved their productions in the space of two years, which is very impressive.
7. The PS3 is perhaps nearing break-even point by 2009.
8. Sony is making profit off of their software.
9. You hate the PS3 with such a bloody passion that it's a wonder you're still around here.
10. The PS3 is making a comeback.

[karlostomy]

1. All my points are valid ... read them again, you sour b1tch.
2. You are just bitter that i am right. again.
3. I did read the article, carefully. But i read it without sdf goggles on.
4. You are in denial and getting angry and abusive again.
5. You have too many multiple accounts, which you use to upbubble your account.
6. You are my snookums-princess-wench, albeit it with stinky milky halitosis no doubt.

[ultimolu]

1. No they weren't dumbass. Which is why you have ten disagrees as of right now.
2. Why should I be bitter? You were wrong, as usual. You did not read the article thoroughly. I did and I understand what was said. It shows that Sony is closer to a pricecut than you realize. You had your head so far up Microsoft's ass that you couldn't see what was going on around you. Sony is still making losses on the PS3 but the losses are shrinking!

Dur ta dur!
3. No you did not. If you did, you wouldn't have concluded with such a dumbass statement like that.
4. Denial? Angry and abusive? Every time I refute your comments, I'm angry and abusive? Only in your world karl, only in your world. You can't stand when you're wrong. :D
5. You read the article with Microsoft goggles on, as usual. I read the article with an open mind. The costs of the PS3 are reducing, and along with it the losses. DUR TA DUR!
6. Lmfao! Multiple accounts? Where? I receive bubbles because I make logical arguments. You lose bubbles because you spread FUD like the plague.
7. I'm not your princess, but you are an asshole. And you will forever remain an asshole because I said so.
8. Get a life dude.

[karlostomy]

1. I have disagrees because i state the truth that the sdf and your multiple accounts don't like.

2. Nowhere did i state that costs weren't being reduced. Of course the costs are being reduced, you asshat. Although I did state that the ps3 was still being sold at a BIG loss, which will lead to a delay of the needed price-cut, which will keep the ps3 in third place, which is true. Learn to read, Juuken, please.

3. "DUR TA DUR!" what does that mean, princess? Is it something they taught you in college? Sometimes I expect more wit from you. Am i expecting too much?

4. Of course you have multiple accounts. Your brand new account is tracked by 41 of them. All yours.

5. I have a great life. I have a wonderful girlfriend. I play drums in a hot band, which pays for UNI. I aced UNI last semester. I play soccer twice a week. I live in beautiful Australia. I drink fine Coopers pale Ale as much as I want. I don't own a ps3. I heckle the sh1t out of you.... Oh boy... can it get any better?

[ultimolu]

1. YOU DO NOT HAVE PROOF THAT I USE MULTIPLE ACCOUNTS. You, however have two accounts. karl, and some other account I forgot about. I bet that's how you keep four bubbles, right?

2. Define big loss retard. How could the PS3 be selling at a BIG LOSS if we don't know how much money they've lost per console? And how could it be a big loss when the losses are reducing? Use your brain el stupido.

3. Dur ta dur explains just how stupid your comments are on a daily basis. It's a made up word so don't worry about it.

4. LMFAO! Some people are tracking me because they want to take my bubbles. Some people are tracking me because they like what I have to say. So I have 41 accounts tracking my main account? Again, you have no proof of this. Prove that I'm guilty of multiple accounts karl.

5. Wow, so you do have a life. Good for you. Better pray the girl doesn't leave you. You have a girlfriend and yet you act like an asshat towards a girl over the internet. You know I tend to curse out 360 fans like you karl? Because most of you talk sh*t without backing it up. There are a few decent 360 fans I respect on this site and you are not part of that group. There are decent 360 fans who respect the PS3 for the console that it is but you do not fit that description.

I cannot stand when people like you talk a lot of sh*t when you have no idea what you're talking about. That tends to piss me off because you know...YOU CAN'T EVEN ADMIT WHEN YOU'RE WRONG!

[MRMagoo123]

@Karl
If your an aussie i'm gonna move to another country because in all my life living in QLD i've not met anyone as stupid as you and the respect you have for the female race is amazing you really must be a hit with the ladies <------- sarcasm in case you where to thick to realise what i was doing there the only ladies i can imagine you being a hit with are the trannies in sydney your one stubby short of a six pack.Any point you had was idiotic at best then you rebut her points with more slurring moronic attacks at her sex.If your gf reads these comments let her read this one LEAVE YOUR IDIOT BF HE'S OBVIOUSLY THE RESULTS OF INTENSIVE INBREEDING IN TASMANIA MAYBE 7 GENERATIONS WORTH PERHAPS, GET OUT WHILE YOU STILL CAN BEFORE HE THINKS ITS A GOOD IDEA TO BRING HIS OWN MUM IN TO BED THE NEXT TIME YOU GUYS GET FRISKY.

[karlostomy]

Here's what i wrote:

1. The ps3 is still sold at a loss
2. The price cut aint happening for a long while yet
3. The Ps3 will remain in third place due to its high cost.

Everything above is true. Read the article. Oh, what the heck. Here's the relevant quote:

"The PS3 now costs $448.73 to build while selling for $399."

That's a BIG $50 loss, right NOW.

If Sony sells 8 million consoles this year, they will have lost ($50x8mill) $400 MILLION just on hardware, which they will need to recoup with falling LBP and R2 sales. (oh dear)

Why do I always have to spell out the details for you Juuken?
Stop pretending and spinning! You always get so angry when you are wrong and I am right and it makes you look the right fool!
I sometimes think you do it because you need to justify your own delusions in the face of overwhelming evidence, reasoning and logical debate.

@Mrmaggoo.
I am astounded at your ignorance. You haven't read ultimolu's history have you? Oh and be sure to check her other account 'juuken'. Juuken is well known for her pottymouth and sdf idiocy on n4g. She rants and raves like a lunatic. It is sad that you excuse her childish behaviour just because she is a woman. Aren't men and women permitted equality in our great country? By commenting, not only did you make a fool of all queenslanders, but you also insulted the Tasmanian population, as well as portraying the transgender community in a negative light. And i can't believe you brought my mum and girlfriend into this. DUDE! that's just sad.

In your one single comment you showed everyone what a bigot you are.
Nice work there, numbnuts.
You call yourself an Aussie?
Please feel free to leave Australia. No one will miss you.
Perhaps you could hook up and move in with Juuken? You'd make a great couple. But please..oh please.. oh please. Don't breed.

oh ... and next time, don't shout. It makes you seem desperate for attention. ok?

[ultimolu]

...Okay karl. You know what? People like you will NEVER admit that you're wrong.

Keep it up.

This article isn't even talking about the total amount of Sony's losses ya jackass. It's talking about how Sony will probably break even by next year and how they halved the productions of the PS3. And like I said, that is very impressive for a console that's two years old. Sony has always lost money on their gaming systems. They make it back up through the sales of software.

They're also profiting from the software they actually sell, which will help them with the losses.

Their losses based on the costs of the parts inside of the PS3 is nothing compared to the 900 million Microsoft lost over faulty hardware!

Stop jumping to conclusions when it has NOTHING to do with the article!

Yeah, I do have a potty mouth. Like I said, it's reserved for 360 fanboys like you and the Microsoft Defense Force. SDF idiocy? Please! I speak what's likely the truth. Like I said, you spread FUD like the plague for the MDF. You sneak around, coming up with every ignorant comment you can come up with on a daily basis.

GROW UP KARL.

And I am done with your ignorant ass!

[Bathyj]

I dont know why people still insist that Sony losses money on every PS3.

Am I the only person who remembers this?
http://www.psxextreme.com/p...

That was in January, almost a year ago Sony cut the price a production from $800 to $400. They were breaking even a year ago. Does anyone here think the price went back up again? Somehow the chips got more expensive. Did BR drive become deerer?

They halved in one year. It would surprise me if they'd halved it again or close to it in the year since then. I dont think, even a 160GB PS3 costs more than $300 to make.

[fishd]

Yeah it seems we are the only one:-/

[evilmonkey501]

well know in march for sure.

[Death]

According to your source, in January 2008 Sony was losing $200 on every PS3 sold. It then states that a bank http://www.nikkocitigroup.c... was able to redesign the PS3 hardware to help Sony save money on production costs. That doesn't make a lot of sense. The 40 gig PS3 was released months before this article. The cost reduction savings that the article claims were the result of a bank re-engineering the PS3 happened months prior to this. If the 40 gig was losing $200 at retail in January and the new changes mentioned in the article already occurred, how did they save all this money?

You also have to look at Sony's financial reports. For fiscal year 2008 which ended in June, Sony reported a loss in their game division for the year. The first quarter of 2009 they still show a loss. If Sony were breaking even on PS3 production, they would be showing a profit.

-Death

[Neo604]

8 years later they'll be billionairs.

[Death]

If in 2009 they do not cut the price of the PS3 then you are correct. They will start to show a profit. If they cut the retail price they will still follow the same path they are now in losses. This is why Sony has been adamant that they are not cutting prices anytime soon. You can't lose money quarter after quarter and then cut the retail price. This would result in higher sales and even more losses. Once manufacturing costs are close to retail Sony will show a profit due to game sales and also PS2 and PSP sales which are generating profit.(Sony is close to showing a consistant profit in gaming now) Once this occurs there may be room for a price cut. I'm guessing around second quarter 2010 which would be fall of 2009.

-Death

[Marty8370]

Another cost reduction is expected Feb/Mar 2009 time when both Cell & RSX go to 45nm production. That should reduce PS3 production costs further by Summer 2009. Sony could be also be in profit by then. So I'm guessing a PS3 price cut may follow shortly after that. And a slim PS3 by Xmas 2009 priced at $299.

[psycho360]

$299 at the end of 2009? Still expensive in my books unless during the year it finally proves that its games are better than 360s. I mite even consider it by then.

[N4360G]

$299 is still too expensive for you? LOL

[ultimolu]

...Are you for real psycho? You can't afford a $300.00 console? Does it need to be 99 cents then? o.o

And there are plenty of good games for the PS3 in 2008. 2009 starts another era of an empty wallet...and a purse.

[psycho360]

Oh i thought it was "Sony tears down PS3" :D

[OSIRUSSS]

I thought there was a article last week that said Sony was raising the PS3 price in the EU?I hope they do too I hope they raise it to 1000 euro. That'll teach those Europeans not to have Currency worth more than the the good ol American dollar.

[tk]

iSuppli prices is not Sony prices. I can guarantee you if you buy 10 pieces of plastic it will be double the price than if you buy 1 million. And if you manufacture it yourself in some cases, then the prices drops another 50%.

Sony has reached break-even point long ago... well, if you mean the $399 price point. I think they are down to around $250 a unit already. But that still does not mean that they are making money per unit. Because when you take the retail price you have to consider that the retailer adds 30% at least on the price that they get it from the supplier, and that does not include shipping costs, marketing etc.

At the Sony store it goes for $249. I guess that is cost + 10%.

[Darkseider]

to bet that the PS3 is closer to break even now in terms of manufacturing cost vs. sales cost. The $448.73 figure given by iSuppli is more than likely 5% - 7% higher than the actual manufacturing cost. So I would guess more in the range of $417.32 - $426.29 to make each unit. I base this more on articles from Sony execs that are over a year old saying that they are near break even.

Also, knowing that the price of the Blu-Ray diode has gone down to $18.86 in qty. of 250k or greater. I know this because one of our customers manufactures BD players. If taking the rest of the article as any word of truth BD Diode at $19 + Cell $46 and RSX $58 the major components minus the motherboard and memory = $123. That leaves $294 to $303 for the rest of the components + manufacturing which is in the realm of reality. Sony, who also have a stake in the design of Cell processor, may be getting a preferred price on the processor as well when purchased un bulk. In any case I would imagine they are far closer to if not at break even already.

[felidae]

i don't know why but to me the XBox 360 feels more complete gaming system - i wouldn't want to miss the great features XBox Live offers + stable framerate in multiplatform games and less aliasing issues.

for example, i read that EA's skate 2 will be once again inferior on the PS3 -- i mean C'mon EA .. fvck u!

with the 360 you know what you get!

[Mutley416]

I love the fact that it costs 840$ for my PS3!!! That`s value considering I paid nothing for them...the guys @ Ebay paid for mine!!!...

I just bought 2 360`s...I feel I got some cheap hardware, just hit the eject button on a Xbox...rickty cheap plastic,and the power supply is the size of a small loaf of bread...I guess you get what you pay for-

[RedRingOfLife]

Hahah the ps3 sucks lol NOW they are trying to put cheap components in their system???
Shiz, Xbox is so much better, they BEEN had the cheapest most shizziest parts in their system. LoL XBOX FTW

[THELANDOFSAND]

good news for sony.

i hope they use this for a price cut or game bundling- its going to be a tough financial year for most consumers, maybe sony can lure them in now