Source: PS3 Still May Not Be Profitable with 70% Cost Reduction
by Jacob Mazel, posted on 14 August 2009 / 5,726 Views
In a recent investor conference call, Sony announced that PS3 production costs had dropped 70%. Many had taken this to mean that PS3 production costs from the November 2006 launch have dropped by 70%. Researcher iSupply had estimated that the $600 60 gig PS3 cost $840 to manufacture in November 2006 – leading many to believe that PS3 cost only $252 to make as of June 2009. According to a source familiar with the manufacturing costs of hardware – the PS3 was reduced by 70% from the start of the manufacturing process – not from the November 2006 launch. While this may not seem like a significant difference, the Xbox 360 apparently cost $850 to make per unit at the start of its production run. By the time Xbox 360 launched in November 2005, our source claims the cost of the parts had come down enough that it only cost $460 to make a single Xbox 360.
Sony is an engineering company at heart, so it wouldn’t be surprising if the initial cost of production was reduced by $300-$500 by the time the PS3 launched in November 2006 even though the system has a lot of very expensive parts to it. Our source believes that $1150-$1250 is a conservative figure for what it cost to make the first PS3s in the run up to the November 2006 launch. Knocking off 70% of $1200 from the initial manufacturing cost through June 2009 would mean the PS3 cost $360 rather than $252 to make.
Presumably a PS3 slim, manufactured with fewer components would reduce these costs further, perhaps allowing Sony to just about break even with a $350 or $300 price point if the initial cost of making a PS3 was $1200. If PS3 costs at the beginning of production were higher than that though, Sony is likely to return to heavy losses with the (highly) likely upcoming price cuts.
Contact Vgchartz at jmazel@vgchartz.com
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