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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.

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MURKERR3561d ago (Edited 3561d ago )

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

TheHater3561d ago

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.

Danja3561d ago

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

IdleLeeSiuLung3561d ago (Edited 3561d ago )

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.

N4360G3561d ago

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.

PoSTedUP3561d ago

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.

Lombax3561d ago (Edited 3561d ago )

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. >.<

Willio3561d ago

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

The Killer3561d ago

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!!

ultimolu3561d ago (Edited 3561d ago )

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. :/

IdleLeeSiuLung3560d ago (Edited 3560d ago )

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.

ultimolu3560d ago

...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.

+ Show (8) more repliesLast reply 3560d ago
PirateThom3561d ago

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.

Danja3561d ago

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...

rhood0223561d ago

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.

Death3561d ago

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 GOD3561d ago

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.

Death3561d ago

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 GOD3561d ago (Edited 3561d ago )

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.

Danja3561d ago (Edited 3561d ago )

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..?

Death3561d ago

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

+ Show (1) more replyLast reply 3561d ago
PimpHandHappy3561d ago (Edited 3561d ago )

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

akaFullMetal3561d ago

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

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