Sony nearly breaking even on PS4 hardware - Report

IHS teardown of new console puts Sony's cost of goods and assembly at $381 per system

The gaming industry is officially through the looking glass. Nintendo, a long-time advocate of turning a profit on its hardware, is selling every Wii U at a loss, while Sony is just about breaking even on the PlayStation 4.

According to an AllThingsD report, market research firm IHS has conducted a teardown of the PS4 and estimated Sony's cost of parts plus assembly on the hardware to be $381, while the console itself retails for $399. That's a far cry from the PS3's launch economics, when IHS estimated Sony manufacturing cost for each machine at $805, far exceeding even the system's already steep $599 retail price.

Most of Sony's PS4 costs are accounted for by the system's CPU and memory. The AMD chip at the heart of the system is estimated to run Sony about $100, while another $88 was attributed to 16 separate memory chips in the system. The Dual Shock 4 controller was pegged at an $18 build cost.

"If your cost is within $10 to $20 of the retail prices, there's very little chance you're making a profit on the console," IHS analyst Andrew Rassweiler told the site.

The IHS estimate falls in line with comments Sony Computer Entertainment Worldwide Studios head Shuhei Yoshida made to GamesIndustry International prior to the PS4 launch last week.

"In a sense, we're doing great because we're not losing billions with the launch of PS4," Yoshida said. "In fact, we're pretty much breakeven in this launch year of PS4..."

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Latest comments (11)

Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.8 years ago
What IHS states and what the company states is often very different.

As stated in the article, Nintendo claims to be taking losses per Wii U sold yet IHS stated a teardown cost of just $241.87.
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Tom Keresztes Programmer 8 years ago
And what about shipping and packaging and retail profit ?
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Sandy Lobban Founder, Noise Me Up8 years ago
Working for Sony in the past I seen the prediction curves for PS2 and PS3 at the start, middle and end. The estimate on PS3 is about right, and there was a much bigger drive to correct that on the latest device, hence the architecture and the manufacter of this one. I think they are probably about right.

Sony just need some games and itll be looking good from the off. The production cost savings over time might be less this time round, but Im sure it can come down a little.

Edited 2 times. Last edit by Sandy Lobban on 20th November 2013 2:50pm

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Daniel Hughes Studying PhD Literary Modernism, Bangor University8 years ago
Tom is exactly right. Shipping, packaging, distribution and marketing should all be factored into this. It's not as simple as comparing manufacturing costs versus on the shelf price.
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Keldon Alleyne Strategic Keyboard Basher, Avasopht Development8 years ago
Yes, but isn't it the breaking even (or nearly breaking even) on hardware that has led to this coming generation having much less inspiring graphics.

Nintendo were able to do this with the GC because they came a year later with (if I remember rightly) the first console with a SoC enabling it to launch slightly more powerful than the PS2* at a lower price for a profit.

This decision on hardware seems to be very short term as it means that the average off the shelf PC will have caught up much sooner.

And as everyone's been saying, the distribution chain as well as R&D needs to be factored into this.

*: these events occurred over ten years ago and my memory of even what I had for breakfast is hazy, and I'm still halfway through it!

Edited 1 times. Last edit by Keldon Alleyne on 20th November 2013 10:58am

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Brian Smith Artist 8 years ago
@Keldon I would have thought that was the core of the reason. The power jump from Ps1-Ps2 asnd Ps2-Ps3 was considerably higher than this next gen. We've gone into budget console territory. I'd be really surprised if these machines last their expected 10 years. Surely they'll be looking old in 4 years.
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Keldon Alleyne Strategic Keyboard Basher, Avasopht Development8 years ago
Oh sorry, I meant this coming generation (fixed). And yes it will look old very soon unless there are some new dazzling shader and geometry technologies included that are yet to be harnessed.
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Adam Campbell Product Manager, Azoomee8 years ago
Yes, but isn't it the breaking even (or nearly breaking even) on hardware that has led to this coming generation having much less inspiring graphics.
I'd say uninspiring graphics is due to an architecture barely tapped and an over-abundance of cross-generation games. That said, some titles considering how early they are i.e. Ryse do look really good.

Even if these consoles were twice as powerful, I wouldn't immediately assume that the graphical bar would be an awful lot higher at launch, simply because all the same shader and lighting effects would be used anyway.

My idea of 'next gen' graphics, isn't the same game with higher resolutions and higher shader quality, it is an approach that is very different to what we saw previously. These devices certainly offer potential for new approaches in graphics rendering.

Edited 1 times. Last edit by Adam Campbell on 20th November 2013 1:59pm

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Andrew Jakobs Lead Programmer 8 years ago
And let's not forget development costs, the thing didn't just designed itself for free, the software didn't magically appear onto the console itself.. it all has to be paid for..
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Andrew Goodchild Studying development, Train2Game8 years ago
The, shipping/storage/retail etc was the first thing I thought of, but the taxes arn't included in that $400. In the US they add taxes at the checkout, I believe, in Europe the price is higher by enough to account for the taxes plus change.

Edited 1 times. Last edit by Andrew Goodchild on 21st November 2013 6:39am

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Sanjay Jagmohan SQA Lead, Sumo Digital Ltd8 years ago
Agreed, but then you have to consider the fact that most consumers will purchase at least one software item with their console; and consider the additional profit/cost for that.

It's all one huge money engine, churning away...
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