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Sony's $89 Cell processor
iSuppli calls the PlayStation 3 an "engineering masterpiece"

While Merrill Lynch may be one of the few firms projecting a win for the Xbox 360 by 2011, a new cost analysis for the PlayStation 3 puts a few more things into perspective with regards to the next generation console battle.

It looks as though Ken Kutaragi was right when he stated that the PS3, which will be priced at $499 and $599 respectively in the United States, is probably "too cheap." According to a new cost analysis by iSuppli, Sony will lose $307 for every 20GB PS3 it sells and $241 for each 60GB version. "With Sony taking a smaller loss on the higher-end model, it's not a surprise the company is steering customers to the 60Gbyte version," said iSuppli. For the United States, 20GB PS3s will account for 20% of the sales mix while the 60GB versions will take the remaining 80%.

Although its initial losses with the PS3 will be large, Sony co-chief operating officer Jack Tretton points out that the original PS and the PS2 became "incredibly" profitable after taking massive losses at launch.

iSuppli summed up it results by stating “While many fret over the high cost and price of the PlayStation 3 compared to the competition, iSuppli believes the console provides more processing power and capability than any consumer electronics device in history. Because of this, the PlayStation 3 is a great bargain, well worth its $599 price and $840.35 cost, iSuppli believes."

Microsoft, which was once seeing red to the tune of $153 per unit sold, is now making a profit of $75.70 on each console before marketing and distribution costs a year after launch.

Nintendo has already stated that it will make a profit on every Wii that it sells. Given that CompUSA lists its cost for the Wii at $237.50, Nintendo's actual costs are likely closer to the $200 mark. That shouldn't be too surprising given that Microsoft's Richard Teversham likened the Wii to a Gamecube with a DVD drive (someone should tell Tevesham that the Wii doesn't actually play DVDs…for now).



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Estimated costs
By psychobriggsy on 11/17/2006 8:17:53 AM , Rating: 2
May not be real world costs. For example, they list the I/O bridge as being $59 to make, yet it is providing less functionality than a <$20 southbridge on any chipset.

Also if the PS2 hardware is only $27, then Sony are currently making a killing on each PS2 sold, and I'm sure they'll be selling at least 4 PS2s for every PS3 over the next few months.

Sony will still be making a large loss though, at least until the cost of BluRay drives drop and Sony do a cost-reduction redesign.

Also I find it hard to believe that the XBox360 has somehow had cost reductions of over $200 in a single year, without a hardware revision.




RE: Estimated costs
By milomnderbnder21 on 11/17/2006 8:43:13 AM , Rating: 2
quote:
Also I find it hard to believe that the XBox360 has somehow had cost reductions of over $200 in a single year, without a hardware revision.


Agreed, that's pretty steep.

quote:
While many fret over the high cost and price of the PlayStation 3 compared to the competition, iSuppli believes the console provides more processing power and capability than any consumer electronics device in history. Because of this, the PlayStation 3 is a great bargain, well worth its $599 price and $840.35 cost, iSuppli believes.


I'm also highly skeptical of this largely unqualified advertisement. A little too enthusiastic, methinks, for an impartial analysis.

Why is it so good? From everything I've read, hardware wise it is not so dissimilar from a 360 as Sony would have you believe. The Cell is largely an unknown (a complex one), and the GPU's are supposedly more of a wash.

Is it purely because of the Blu-Ray drive that it's such good value? Why should everyone care so much about that? I don't have an HD tv, let alone one supporting 1080p, as many people yet don't.

I'll wait for prices to drop significantly for the 360 before I potentially get one of those, and I have no plans at all to get a PS3. I don't see this great 'value' that iSupply trumpets.


RE: Estimated costs
By psychobriggsy on 11/17/2006 9:06:47 AM , Rating: 2
Looking at the article, the XBox360 motherboard, including components, is listed at $204, whilst the PS3's motherboard, including components, is listed at ~$500.

Maybe the RSX and Cell processors are a little bit more expensive than their XBox360 counterparts, but the listed prices are still low for these components. The amount of memory is the same, although the PS3 uses XDR and on-package DDR3 (maybe this is included in the cost of RSX though). The PS3 also has the PS2 hardware. Otherwise component-wise the motherboards are quite similar - I cannot see how there is a $300 difference.

Similarly with the power supply - the external, boxed XBox360 powersupply is significantly cheaper than the internal, unboxed PS3 power supply?


RE: Estimated costs
By Oregonian2 on 11/17/2006 1:53:39 PM , Rating: 2
The costs put out by this company do seem high. I think they "did" Toshiba's HD-DVD player and declared they were losing money on it while Toshiba said no-way and that they were profitable (which I'd expect, they're not exactly the big movie-disk maker who would make it up on the software). That said, the numbers as presented are a problem.

They say it costs $840 for a $600 box, so the maker loses $240. This is bogus to begin with because Sony doesn't get $600 on sale of it, there's the seller's margin, import duty, brokerage fees, etc that come off of the selling price to yield what Sony gets. Maybe this market has smaller margins, but to cover advertising and other selling costs (plus hopefully profit) retail sellers usually demand pretty good margins on things, as much as 40%. Maybe in this market it can be smaller, but it still needs to be significant to be worthwhile selling by a retailer.

I can only conclude that the retail-selling costs are included as percentage "tax" on the parts-costs that they estimate. That would be the only thing that makes things more sensible.


RE: Estimated costs
By Lonyo on 11/17/2006 5:32:11 PM , Rating: 2
But... there is no sellers margin, and that's why the retailers love the Wii.
IIRC retailers pay pretty much $600 for a PS3, then sell it for $600, they make money on software.
The Wii is sold to them for $237.50 and they sell it for $250, so they make more margin on the hardware, and THEN they also make money on the software.
But you are right about some of the other numbers, Sony have to distribute the things etc.


RE: Estimated costs
By Lonyo on 11/17/2006 6:04:51 PM , Rating: 2
They also list the Xbox 360 DVD drive being almost $20, but a plain DVD drive from Newegg costs $12 retail.

I'm really not sure where they get their numbers from, but they do seem very suspect on both sides of it, some seem too high, some seem too low.


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