Comments on: Is Sony Losing Their Shirt On Each PS3?

By: Duck Hunter

Duck Hunter — Fri, 15 Dec 2006 05:17:06 +0000

I just came across this chart showing how much the Wii is costing Nintendo. The graphic also shows numbers for the PS3. Here’s a link if you are still interested:
http://www.kotaku.com/gaming/wii/wii-autopsy-discovers-manufacturing-cost-221736.php

By: Sairon

Sairon — Wed, 29 Nov 2006 17:24:46 +0000

Yes that does seem a little odd, and I can’t question the fact that the article does seem very biased. I know nothing about iSuppli and their credibility when it comes to these things. One of the reason for the power supply having such a high production cost might also be because of the fact that there’s a need for a very low heat generation due to the machine being so compact. Of course it’s just speculation, would be intresting to see some replies from iSupply, you should mail them and attach a link to this article if you haven’t already done that.

By: Phil Steinmeyer

Phil Steinmeyer — Wed, 29 Nov 2006 16:15:52 +0000

Sairon, it’s true that my guesses may be off, but they seem reasonable to me. Even adding in some additional overhead, the costs in the table seem quite high.

In particular, comparing their estimates for the 20GB PS3 ($805.85), and the 20GB XBox 360 ($323.30), suggest that something is amiss.

At the line-item level, they’ve got $6.10 for manufacturing costs on the XBox 360 and $39.00 for PS3 (PLUS that vague sounding ‘Other Components and Manufacturing’ at $148.00).

Why such a large discrepency?

Or, looking at it top down, why is there a ~$480 price difference between the two. The Blu-Ray adds about $105 in marginal cost above a regular drive. But as for the rest of it - I just question whether the incremental costs of the Cell and the rest can add up to $375 in incremental costs for the PS3, over and above what comparable parts cost for XBox 360.

By: Sairon

Sairon — Wed, 29 Nov 2006 16:05:51 +0000

As you said, you’re just throwing guesses around without any real basis. Transportation of modules is most likely included in cost. Also, workers don’t work alone at their homes, there’s management and other personel for keeping facitilities going. I don’t know the details of taiwan, but often there’s other social fees applied on top of salary which employers need to pay. It’s pretty hard just being a layman making guesses about production cost of high end electronics. It’s most likey not like manufacturing car when you’re working at microscopic levels and the QA problems which comes with it.

By: Phil Steinmeyer

Phil Steinmeyer — Thu, 23 Nov 2006 03:16:47 +0000

But even if the plant will depreciate by $1 Billion over the life of the PS3 (whether from $1B to $0, or from $1.5B to $0.5B, both of which seem excessive, but I’ll roll with them)…

There will likely be 50-100 million PS3’s made. So the fab plant amortization, per cell chip, is around $10-20 per. There would be other costs, too, including the R&D cost behind the chip. But still, the cell is in that table at $89, which seems excessive.

If Sony also uses the cell for many other non-PS3 uses, and/or produces cells at the plant for other uses, then that further reduces the amortization cost, per chip.

By: kim pallister

kim pallister — Wed, 22 Nov 2006 19:29:00 +0000

At least one factor to consider is the fact that Sony built a fab in order to build the cell processor. The cost of the chip itself aside, one thing I learned in my time at Intel is that fabs cost mind-boggling amounts of money.

e.g. (rough estimate): A 300mm/64nm fab costing, lets say, 1B-1.5B to build. The parts it makes will be obsolete or at best super-commodotized in 4 years. They may still make cell at that time, but on newer process, which means a new or re-tooled fab. That works out to a depreciation of $1M per day.

Crazy business!

By: Duck Hunter

Duck Hunter — Sat, 18 Nov 2006 15:41:05 +0000

Phil,

Very good post on this. I always believed that the big 3 always lose money on the hardware. You’re numbers make more sence to me. I think we could add costs to the initial run units if you spread the cost of development over them.

Honestly, I’m more interested in the Wii anyway. They are selling for almost half the price.

By: Factory

Factory — Fri, 17 Nov 2006 23:01:24 +0000

I agree alot of these analysis estimates seem like bollocks. But where I do think that Sony are loosing money is the huge opportunity cost in not selling blue laser components to third parties, given the sortage in these components.

“Taking a very wild guess, Iâ€™d say the $305 figure is off by a factor of 2 or so.”

Hmm I personally believe that the 800ish figure is off by a factor of two.
1. The drop in price of the PS3 core to 50k yen in Japan, methinks that drop was prolly as low as they could go before loosing money on the console. Which is why they chose that price, rather than any other.
2. Given the two tier pricing strategy it would make sense to have the lower tier as the ’subsistence level’ profits and the higher tier as the ‘lets rake in the cash’ profits. which a 400 odd build cost will do.

But then again nobody outside of Sony knows the actual price of the PS3, so it’s all guessing really.