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The Cell Broadband Engine as it resides in the PS3  (Source: DailyTech)
Sony hoping to break even on PS3 production by March 2008

The PlayStation 3 is an expensive console – not only for consumers, but also for Sony as well. Despite the console’s big sticker price, Sony is still currently paying more to manufacture the console than consumers are paying to take them home.

At the time of the PlayStation 3 launch in mid-November, iSuppli estimated that Sony was losing $240 on each 60GB PS3 it sold and $300 on each 20GB PS3 that it sold. Sony was able to stem those losses somewhat by dropping the 20GB PS3 from its product mix in North America.

Sony executive VP Nobuyuki Oneda said during an investor conference call that the company may be able to break even on PlayStation 3 production costs sometime this fiscal year, which ends March 2008.

“For the negative margin to go away, the big trigger would be the cost-down in the Cell and RSX semiconductors. They are the key, and also optical pick-up is another factor, significantly,” Oneda said, according to Next-Gen. “The removal of the negative margin will be when all of these factors have come out. Maybe, marginally, we could achieve this during this year.”

Oneda added that Sony is working to transition the Cell Broadband Engine chip from its current 90nm process down to the 65nm process – a move that is expected to improve chip efficiency and lower costs. The RSX graphics processor in the PlayStation 3 is also expected to make a similar die-shrink sometime shortly after.

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By christojojo on 7/27/2007 1:20:37 PM , Rating: 2
They hope to stop losing money and I hope to stop losing my hair.

Yes, economics of scale and improved manufacturing will cut cost but nicely ignoring competition with fat wallets won't make that easy.

If Sony doesn't drop prices and MS does then Sony wont gain market share it needs. If Sony drops prices MS will too. If the prices get too close to Nintendo then they'll respond with a drop. (Yes, I am not a mind reader, but history has shown the above trends.)

Sony is more than likely going to have to take a drop in price and a loss in order to capture more market with this current generation of systems.

Note: I think we can stop calling them next gen systems since there 10th through their "5 yr" cycle pundits have said they're on.

RE: Wishes
By mdogs444 on 7/27/07, Rating: 0
RE: Wishes
By xphile on 7/28/2007 2:22:33 AM , Rating: 1
I dont think there is ANY kind of special language here - if you read the article Oneda really makes the strategy perfectly clear...

“For the negative margin to go away, the big trigger would be the cost-down in the Cell and RSX semiconductors. They are the key, and also optical pick-up is another factor, significantly,” Oneda said, according to Next-Gen. “The removal of the negative margin will be when all of these factors have come out..."

The Emotion engine was a good start, and when all the above factors (Cell, RSX and optical pick-up) have come out of the PS3, Sony will be making money :-)

/unintentionally extremely funny Sony Executive jargon

RE: Wishes
By mdogs444 on 7/27/2007 1:36:19 PM , Rating: 2
What we've learned so far is that Sony has a special language spoken inside by the executives

Cutting Costs = Cutting Corners
Die Shrink = Remove Chip Totally
Break Even = Screw Someone
New Version = Less Functionality/More Money

RE: Wishes
By vitul on 7/27/07, Rating: 0
RE: Wishes
By mdogs444 on 7/27/2007 2:17:10 PM , Rating: 2
It was just a joke, but go ahead, because i dont like the 360 either lol.

By removing the chip i was referring to the chip that allowed by PS2 compatiblity, as opposed to software emulation.

RE: Wishes
By deeznuts on 7/27/07, Rating: 0
RE: Wishes
By someguy123 on 7/27/2007 3:20:34 PM , Rating: 2
actually even "supported" games have reports of problems. all the upscaling does is just blur the picture as well, but I guess it does smooth it out.

RE: Wishes
By GreenyMP on 7/27/2007 5:29:40 PM , Rating: 2
all the upscaling does is just blur the picture

Wow. All of those upscaling DVD players selling like crazy and now I find out that it is because the DVD image is too sharp. They are paying for an upscaler to blur it for them. I never would have guessed it because I prefer a sharp image myself.

In case you didn't catch the sarcasm it started at "Wow". Some people say the dumbest things!

RE: Wishes
By Mithan on 7/27/2007 9:16:14 PM , Rating: 2
This is the internet, what did you expect.

RE: Wishes
By christojojo on 7/27/2007 4:14:41 PM , Rating: 2
Judging by the bad scores for both pro Sony and Pro MS, the fanboys are voting by emotion (no pun intended)

p.s. I thought it was funny, too

RE: Wishes
By christojojo on 7/28/2007 9:51:11 PM , Rating: 1
Out of curiosity why am I gigged for what I typed . No rebuttals, no corrective dialog, just gigs.

By Verran on 7/27/2007 1:29:16 PM , Rating: 1
As my father told me...

"Hope in one hand, excrete in the other, and we'll see which fills up first."

If they were losing $240 before, they're losing $340 now. They'll need to cut the production costs by 40% just to break even. Seems like a lofty goal to do by the end of the fiscal year...

By Mattz0r on 7/27/2007 2:06:39 PM , Rating: 2
I don't think they're losing $340 right now... in fact, I think his statement is correct in that they COULD, by the end of the fiscal year, actually be making money. Of course, in order to do that, we have to make a few assumptions:

1) We're looking at the higher priced 80GB model, not the lower priced 60GB model (that they're just dumping stock of anyway)
2) The price of the 80GB model remains constant.

With those assumptions in mind, I think it's quite possible that they could be making money. I know that Sony finally managed to get it's production of BR diodes in order earlier this year; this, as far as I know, was not factored into iSupply's component cost list. As the BR diode is one of the costlier components, this could have already brought the price down. The 80GB HD that's in there now probably costs Sony the same as the 60 did, and is in fact probably cheaper (as more than half a year has allowed prices to drop.) As well, with the removal of the EE+GS chips, and natural improvements in the manufacturing process, I think it's quite feasible to say that that $240 they were losing previously has been brought down quite a bit in the last 6 months. Then, if you factor in the die shrinks discussed in the article, it doesn't seem too far fetched to imagine they could have brought costs down significantly.

By bhieb on 7/27/2007 2:19:43 PM , Rating: 2
Then, if you factor in the die shrinks discussed in the article, it doesn't seem too far fetched to imagine they could have brought costs down significantly.

Don't over estimate the benefit of this. Yes it will lower cost, but not by the end of the fiscal year. Keep in mind to lower the overall cost, the price of actually moving to the new manufacturing has to be repaid first. I am not even remotely qualified to discuss the ROI on moving to a new process, but I would think it would take quite a bit of production to recoup the cost.

By Mattz0r on 7/27/2007 2:29:39 PM , Rating: 2
I'm not even remotely close to anything near an expert on re-couping costs, but wouldn't, to take the Cell as an example, the costs of moving to a 65nm process be diluted by the fact that they're moving the process over for AMD processors as well?

By MonkeyPaw on 7/27/2007 5:31:43 PM , Rating: 2
IBM does not make AMD CPUs. Last I heard, FAB36 (where AMD makes a large portion of its CPUs) is fully converted to 65nm, and FAB30 is still awaiting the investment in new equipment. IBM and AMD do collaborate on process technology, but they retool independently of each other. Also, the fabrication equipment is manufactured by a third party, so it's often a matter of who gets the equipment (which is limited in availability) first. Intel typically buys all of this new equipment first (at a higher cost), which also explains why Intel is always the first to new process nodes.

As for recovering costs for retooling, that is part of the overhead of a semiconductor company. With any luck, the new equipment is already part of the company's long-term budget, since improved process technologies are always on the horizon. I'm sure IBM already has a timeline for moving Cell to 32nm. Once the smaller Cells arrive, Sony should see a price drop. As IBM's 65nm matures, the price might slowly go down as yields improve.

By afkrotch on 7/27/2007 11:06:33 PM , Rating: 2
Seeing as IBM is the one producing the Cell and Nvidia is producing the GPU (actually, whatever company it was that Nvidia goes through), Sony doesn't have to recoup costs on moving to a new manufacturing process. So all in all, they get to drop prices.

By enlil242 on 7/27/2007 5:00:54 PM , Rating: 1
Well, I hope to look like Brad Pitt by the end of the year!!!

Hoping something happends doesn't neccesarily make it so...

By PitbulI on 7/27/2007 2:28:15 PM , Rating: 2
This holiday season, we will all see what consoles will be successful in 2008.

Unless Sony has a cheaper console with a game bundled in, I doubt they'll really beat out Microsoft who will probably have a special promo perhaps even with Halo 3 and perhaps even a few dollar price cut just for the holidays. Nintendo at their price will of course sell really well as long as there are more good games other than Wii Sports. Of course there will be like Mario Strikers. I want that game but that's coming out in days.

As for Sony not losing money this fiscal year? How?

Don't they have to pay R&D to get the chips smaller? And Microsoft is just going to sit and watch? Oh wait, MS is already shrinking their chip and hopefully that will stop the RROD problem that has even taken my console a few weeks ago.

The only thing that can give Sony a boost over Microsoft is if the new 360 CPU has as many problems as the old CPU and if Sony can match the price of perhaps their 60 gig model if it's still available with the 360 Premium.

And, this is saying that Microsoft won't come out with some HD-DVD holiday bundle which would probably sell well if the price was lower than the PS3.

By afkrotch on 7/27/2007 11:26:14 PM , Rating: 2
The Cell is a collaboration between three companies and they already have many plans to recoup costs in R&D.

Playstation 3, Mercury Computer System's dual cell comp, MMORPG servers, HDTV, Mainframes, super computers, etc.

As for Microsoft, who do you think makes their processor? Who do you think is going to get first dibs on a processor shrink? I'm just hoping that IBM doesn't screw around, like they did with the PowerPC procs for Apple back in the day.

By neothe0ne on 7/29/2007 5:44:31 PM , Rating: 2
Did you seriously mention how consoles' fates will be decided this holiday season, mention Halo 3 for Xbox 360, and just state "Mario Strikers" as the game for Wii, coming out in a fwe days not even close to holiday season, and ignore Super Smash Bros. Brawl, Super Mario Galaxy, and Metroid Prime 3?

Just reading the headline
By Griswold on 7/27/2007 1:10:36 PM , Rating: 4
..I thought Sony plans to stop selling any PS3 in order to stop losing money. :p

Sony Hopes...
By ChipDude on 7/28/2007 12:41:08 AM , Rating: 2
That is a good starting line!

Sony has done a lot of hoping but forgot common sense, forgot why people by game boxes, forgot what makes people excited, forgot what is supply demand..

Its good they still have hope, its clear that no one all the way to the top understand the game market these days

Nintendo can earn more.
By nvalue on 7/28/2007 12:58:26 AM , Rating: 2
If Sony can minimize the cost of making PS3, I think Nintendo can also do the same thing. We all know that Nintendo can earn about $100 by selling each Wii consoles compared with Sony lose $240 by selling each PS3. If Sony hopes they can stop loss in March 2008, I think Nintendo can earn $150 or more at this moment.

By radzer0 on 7/28/2007 11:02:43 AM , Rating: 2
Putting out the 80gb ps3 at the 599 price range when the actual cost of a 80gb over a 60gb notebook drive might be like $5 (sonys cost)

Thats $95 more coming in.

and figure another $70 or so on a die shrink.

I have no clue what kind of money can be saved on the bluray drive.

Im personaly waiting for a 299 ps3 before i buy one if i do. They still aint smart enough to change there controler.

By Polynikes on 7/28/2007 12:52:01 PM , Rating: 2
If they don't bring back the emotion engine, once they've got the costs under control and can afford to sell the 80GB model for a little bit more with it in, then I'm never buying a PS3.

"Folks that want porn can buy an Android phone." -- Steve Jobs
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