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Tuesday, November 19, 2013
Sony PlayStation 4 Hardware Cost Is $381: IHS

Sony's latest revision of PlayStation console is not sold at a loss, with the bill of materials (BOM) for the PlayStation 4 to be $372, according to an IHS teardown analysis.

When the manufacturing expense is added in, the cost increases to $381, the reseach firm found. This comes in $18 lower than the $399 retail price of the console.

When other expenses are tallied, Sony initially will still take a loss on each console sold. But the relatively low BOM of the PlayStation 4 will allow the company to break even or attain profitability in the future as the hardware costs undergo normal declines.

"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. 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," said Jordan Selburn, senior principal analyst for consumer platforms at IHS.

The PlayStation 4 is more economical for Sony than even the revision of the PlayStation 3 torn down by IHS, which was shipped in 2009, a model dubbed the CECH-2001A. That version of the PlayStation 3 carried a $336 BOM and manufacturing cost compared to a $299 sales price.

The costliest subsystems in the PlayStation 4 are the core processor and the associated graphic dynamic random access memory (DRAM), which together entail $188 - representing slightly more than 50 percent of the BOM of the entire console. This compares to only 29 percent for the fourth-generation PlayStation 3.

For the PlayStation 4, Sony clearly has integrated two functions - the core central processing unit (CPU) and graphics processing unit (GPU)–that were previously two discrete ICs.

The processor exhibits a high degree of integration, using 28-nanometer semiconductor manufacturing, and combining both the CPU and GPU into a single device. The Advanced Micro Devices Inc. processor includes an eight-core Jaguar CPU and a Radeon GPU. This processor costs $100.00, IHS estimates, compared to an $83.55 combined total for the two prior, equivalent integrated circuits from IBM and Nvidia that were used in the PlayStation 3 that IHS analyzed in 2009.

The cost increase for the DRAM is even more remarkable, at an estimated $88.00, up from just $9.80 for the fourth-generation PlayStation 3, i.e. the CECH-2001A. Note that the $9.80 total does not include the DRAM that was mounted directly to the Nvidia processor in the PlayStation 3 that IHS analyzed in 2009. This cost increase is due to the PlayStation 4’s adoption of advanced Graphics DRAM (GDRAM) GDDR5.

Offsetting the increased costs for the processor and memory are unchanged or lower expenses for other subsystems.

The biggest area of cost reduction is in the optical drive, at only $28, compared to $66 for the CECH-2001A PlayStation 3. With the optical drive mechanism remaining largely unchanged since 2009, Sony was able to capitalize on the dramatic price erosion in this product during the past four years.

Sony trimmed another $10 from the BOM by using a more integrated design overall for the PlayStation 4. The design allowed Sony to reduce the number of small-sized integrated circuits, discrete semiconductors and passive components. The total cost of these devices amounted to $40.00 in the PlayStation 4, down from $50.23 in the CECH-2001A PlayStation 3.

Another $5 reduction was achieved in the mechanical portion of the design, including enclosures—like plastics and metals--and in the electro-mechanical content, such as printed circuit boards, connectors and wire harnesses.

The hard disk drive in the PlayStation 4 is $1 cheaper than the one in the CECH-2001A PlayStation 3, despite a major jump in capacity to 500 gigabytes (GB), up from 120 GB. This cost reduction reflected the major decline in HDD costs during the past four years, accoding to IHS.

Rival teardown specialist TechInsights on Friday estimated the cost to Sony of making the PS4 at just $296, pointing to a gross profit of almost $100.

The disparity comes mainly from differing estimates for how much Sony is paying for some key components.

IHS, for example, put the AMD processor in the new console at $100, compared to $85 for TechInsights. IHS put the memory chips in the PS4 at $88; TechInsights estimated their cost at $62. IHS put the hard drive at $37, compared to $23 for TechInsights.

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