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PlayStation 3 could see a price cut with cheaper Blu-ray components

The Blu-ray Disc drive inside every PlayStation 3 is one of the console’s most expensive components. Fortunately, production capacity of blue-violet laser diodes required for the Blu-ray Disc drive is ramping up faster than originally projected, which could soon drive down costs for the PlayStation 3.

According to Semiconductor Today, Sony Corp. subsidiary Sony Shiroishi Semiconductor Inc. of Japan claims to have established an industry-leading monthly production capacity of 1.7 million blue-violet laser diodes, with preparations in place for upping it to 5 million blue-violet laser diodes per month.Increased blue-violet laser diode production means a lower bill of materials cost for Sony, which could help pave the way for the savings to be passed onto the consumer.

"The right question to ask is whether the full bill of materials is below $499, allowing them to cut price and still avoid losing money. I'm not competent to answer whether it is, but I am competent to say that when cost is below $499, we should look for a cut to that level," Wedbush Morgan Securities analyst Michael Pachter told GameDaily BIZ. "The point is that if they're ramping capacity to [5 million diodes], they probably are coming down the cost curve for MPEG chips, dedicated disc drive processors, and every other component. Hard to say for sure, but I'd guess that Sony could squeeze a hundred dollars out of its cost by mid-year, maybe more."

"My guess is that you will see a price cut this year," he continued. "I think that the introduction of the Xbox 360 Elite gives Sony an opportunity to cut price and claim that they offer Blu-ray for only $20 more."

The advanced Blu-ray hardware is partly to blame for the machine’s premium price, spotty launch supply and the European delay. In light of the challenges the PlayStation 3 has faced because of the next-generation optical format, Sony stands by its hardware, calling the choice to include Blu-ray the smartest decision it has ever made.

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$20 less?
By Lonyo on 4/30/07, Rating: 0
RE: $20 less?
By apollo7 on 4/30/2007 4:12:19 PM , Rating: 2
quote:
"My guess is that you will see a price cut this year," he continued. "I think that the introduction of the Xbox 360 Elite gives Sony an opportunity to cut price and claim that they offer Blu-ray for only $20 more."


It was implied that this would be after a price cut. A cut that would drop the PS3 to 500.


RE: $20 less?
By James Holden on 4/30/2007 4:13:17 PM , Rating: 2
Yeah, that guy in the interview is speculating about Sony taking the price of the PS3 down to $499 if Sony is cutting the cost on the diode.


RE: $20 less?
By MonkeyPaw on 4/30/2007 4:41:24 PM , Rating: 2
That, of course, assumes that MS will not drop the price of the 360 at the same time. MS has been producing the 360 roughly a year longer, and last I heard they were actually making a small profit on each unit. With that in mind, who's to say that the Elite won't drop down to the $400 price point, the Premium to ~$300, and the Core to ~$250? The only things determining price variation are an HDMI port, controller type, and HDD capacity.


RE: $20 less?
By alifbaa on 4/30/2007 5:50:07 PM , Rating: 2
I could easily be wrong, but I believe what has been revealed so far is that M$'s current plan is to phase out the core, reduce the premium to the current core price, and sell the future white xbox w/HDMI (likely coming out this summer along with 65nm processors) at the current premium price.

Keep in mind, if they reduce the price of the top tier system now, it will be impossible for them to raise the price later for something as indistinguishable as a 65nm processor. They have to keep the price up high enough to fix their thermal management problems in the future.

Having said that, the elite didn't add anything expensive, and 65nm processors won't cost much extra, so there is probably room for M$ to cut prices whenever they choose.


RE: $20 less?
By Nightskyre on 4/30/2007 11:26:54 PM , Rating: 3
You're wrong. That has consistently been posited by consumers as a "make sense move," to keep only two SKU's for the 360. However, Microsoft has announced exactly the opposite, that they plan to maintain all three SKU's.

Reference: http://dailytech.com/Xbox+360+Elite+Launches+in+No...

I'm curious to know where you got your information regarding a white X-Box with HDMI. I've heard nothing of the sort, and I work for a games company.

"Keep in mind, if they reduce the price of the top tier system now, it will be impossible for them to raise the price later for something as indistinguishable as a 65nm processor."

I don't see your logic here either. When Microsoft (Not M$, Microsoft) moves to a 65nm process, they're going to reduce the cost of manufacturing their processors, due to being able to have more chips on a single wafer board. This translates to less cost for Microsoft *without* changing the price to consumers. There is no reasonable scenario that sees Microsoft raising the price on a pre-existing piece of hardware.

"They have to keep the price up high enough to fix their thermal management problems in the future."

They do? The last time I checked, the mainboard of the Elite showed significant layout changes which appeared to ease the thermal pressures the board was previously experiencing. Further, I don't know why you think the price has to remain "high" in order for Microsoft to correct a known issue. There's a disjoint in your logic there.


RE: $20 less?
By JimFear on 5/1/2007 2:59:23 AM , Rating: 3
"I'm curious to know where you got your information regarding a white X-Box with HDMI. I've heard nothing of the sort, and I work for a games company."

There was an article posted on this site stating that eventually the Premium SKU would gain elite hardware i.e. HDMI and the HANA scaler.

They will not incur any cost from moving to 65nm, as you said it'll be cheaper and good for them in the long run, they'll still need to sort out those damn noisy drives and more than likely re-engineer the cooling to make it a little more quiet, they have a fari bit of space in the 360 available so it could easily have a PS3-esque fan and heatpipe arrangement.

"They do? The last time I checked, the mainboard of the Elite showed significant layout changes which appeared to ease the thermal pressures the board was previously experiencing. Further, I don't know why you think the price has to remain "high" in order for Microsoft to correct a known issue. There's a disjoint in your logic there."

By that I assume you mean expoying the CPU and GPU down after soldering to keep it in place, to be perfectly honest I think thats a bit of a bodge job way of fixing the problem.


RE: $20 less?
By Nightskyre on 5/1/2007 3:00:39 PM , Rating: 2
quote:
There was an article posted on this site stating that eventually the Premium SKU would gain elite hardware i.e. HDMI and the HANA scaler.


Reference?

I just did a search and I can't seem to find this article.


RE: $20 less?
By ani4ani on 4/30/2007 5:52:52 PM , Rating: 2
Microsoft gaming division just posted another $400M loss for the quarter, bringing their losses on the XBOX brand to $5.4B since launch. I doubt they are really making money on the consoles at all.


RE: $20 less?
By ZimZum on 4/30/2007 6:26:29 PM , Rating: 1
They have been turning a nice profit on the 360 consoles since at least November of 06.

http://www.videogamesblogger.com/2006/11/16/ps3-lo...

Much of the losses are due to R&D and marketing. Xbox live for example cost Microsoft 2 billion just to set up the network infrastructure. Which is why Sony or anyone else for that matter is in a hurry to offer a similar service.


RE: $20 less?
By ZimZum on 4/30/2007 6:28:23 PM , Rating: 2
should read 'is in NO hurry"

Is there no edit fuction or am I an idiot?


RE: $20 less?
By psychobriggsy on 4/30/2007 9:34:44 PM , Rating: 2
That's assuming iSupply's figures were in any way based on a reality within this universe. All the evidence suggests that they weren't.

The Elite is more expensive despite low sales of 360 - Microsoft have shown no desire to cut prices to increase demand. MS made that huge loss on that entertainment division despite profits from games and subscriptions, etc. They sold 4 million since that report - that's $300m profit supposedly ... so they made >$800m loss elsewhere? Entirely possible I guess.

I expect that they're selling the Elite for a profit, *just*, and that's with early 2007 costs, not fall 2006 costs.


RE: $20 less?
By Zandros on 4/30/2007 10:15:19 PM , Rating: 2
Which means that they aren't turning a profit at all, they are just minimizing losses as they go along. Doesn't matter if you turn a profit on materials if the company, or in this case division, isn't profitable as a whole. Besides, that is only estimates, though it would be more clever to make a conservative calculation, so it would perhaps be in MS favour.

Unless you want to use the same logic as the RIAA, of course.

Excuse me for any odd spelling, I'm a bit drunk at the moment.


Question
By Sungpooz on 4/30/2007 4:37:33 PM , Rating: 2
As late as it is, I'm not aware of the current % of people who WOULD buy a PS3 already has a current-gen system. I mean, I just thought that the xBox360 had at least a moderate headstart on the unbiased budget-tight gamer... Wouldn't it have made a biger difference if the price cut came, let's say, a month ago, or before elite came out?...




RE: Question
By Axbattler on 4/30/2007 5:23:08 PM , Rating: 2
Better late than never. Plus, it's true that the Xbox360 has a decent headstart and the Wii a better momentum right now. But it is a little early to say that people who would buy a PS3 already have a current-gen system. Going by the Nextgenwars numbers, only ~20 millions current gen consoles have been sold. That's not even 1/5th of the PS1 or the PS2 sale alone. There is still plenty of opportunities on all side, although it is also clear that Sony need the most 'push' right now.


RE: Question
By alifbaa on 4/30/2007 5:57:56 PM , Rating: 3
I agree. I know I'm stuck between what I see as two bad choices right now.

On the one hand, there's the 360 with its huge fan base here in the states. Unfortunately, I'm afraid of its reliability problems. I'd be more comfortable if it had a longer warranty included given its very poor reputation.

On the other hand, there's the PS3 which is made by Sony, who I detest. To make things worse, it's massively expensive. But, I think they got a lot of things right with the open platform, included wifi and HDMI, and the ability to put in any hard drive you want.

The result of all this is that while I'd like to get a new console, I've sat back and waited.


RE: Question
By sxr7171 on 4/30/2007 9:29:31 PM , Rating: 3
Yeah I dislike Sony too, but I bought it for movies. I'm also thrilled that I cost Sony $300 with my purchase and I never intend to buy games for it. If you need a real gaming machine the 360 is the better bet, but I find it a little overpriced for what it offers right now. They should just make the Elite $400, the Premium $350 and just phase out the Core system.


iSuppli numbers
By borowki on 4/30/2007 5:47:45 PM , Rating: 2
iSuppli puts the bill of materials for the PS3 at ~$800. Can they really chop $300 off that quickly after launch. If I remember correctly, the price of the BR drive was estimated at $125.




RE: iSuppli numbers
By Torched on 5/1/2007 10:59:37 AM , Rating: 2
Maybe not three hundred but there are many areas that can be cost reduced:

1) Removal of GS + EE chips in favor of an emulator
2) Replacement of the Toshiba SCC for a in house chip with unneccesary functions removed
3) 65nm shrink for Cell BE
4) smaller cheaper cooling solution after die shrink
5) looser spec power components
6) volume production of rare parts i.e. blue laser diode
7) shopping around for cheaper discretes


RE: iSuppli numbers
By mars777 on 5/1/2007 6:31:28 PM , Rating: 2
- cheaper laptop hard drives
- cost of launch (rd & others) is gone
...(entire division counts not only the product)


Besides PS3...
By AmpedSilence on 4/30/2007 4:23:17 PM , Rating: 2
How would this affect stand alone players? I am more curious about that market than the PS3.

Also, interesting that this comes at the heels of Wal-mart rumors of a cheap HDDVD player. (i realize that they have been denied; but the same thing happened with the 'Elite' XBOX 360, so i dont water to denials of Execs)




RE: Besides PS3...
By Torched on 5/1/2007 10:44:24 AM , Rating: 2
$299 HDDVD is a debunked rumor for now:
http://www.physorg.com/news96888339.html


RE: Besides PS3...
By EclipsedAurora on 5/1/07, Rating: 0
RE: Besides PS3...
By SavagePotato on 5/1/07, Rating: 0
Don't be naive
By dagamer34 on 4/30/07, Rating: 0
RE: Don't be naive
By michal1980 on 4/30/2007 9:33:18 PM , Rating: 1
Kutaragi is gone.

and just think about how many costs have already come done, in 6 months or so the 200+ dollar loss per console, is becoming 0. wait according to this article could soon turn into 100 dollars profit per console.

since the goal of selling consoles is to sell software, if sony's bom is coming down to 499, they could do an even bigger price drop, to 399, and loss 100 dollars a console, still lossing money, but no nearly as much as before, at a price everyone could love.


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