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Locked: Report: PS5 manufacturing cost pushed to $450 due to competition and scarcity of parts

Forums - Sony Discussion - Report: PS5 manufacturing cost pushed to $450 due to competition and scarcity of parts

https://www.gematsu.com/2020/02/bloomberg-ps5-manufacturing-costs-pushed-to-450-per-unit-sony-facing-pricing-difficulty-due-to-competition-and-scarce-parts

Bloomberg: PS5 Manufacturing Costs Pushed To $450 Per Unit, Sony Facing Pricing Difficulty Due To Competition And Scarce Parts 

Some features planned for camera reportedly cancelled due to DRAM shortages.

Scarce components have increased manufacturing costs for PlayStation 5 to around $450 per unit, according to a Bloomberg report citing “people with knowledge of the matter.” 

Whereas Sony Interactive Entertainment typically finalizes a console’s price in February of the release year, followed by mass production in the spring, Bloomberg reports the company is taking a wait-and-see approach with PlayStation 5.

PlayStation 4, which was released in November 2013 for $399, is estimated to have cost $381 to manufacture. If PlayStation 5 has a similar gross margin, its retail price would have to be at least $470.

According to Bloomberg, Sony Interactive Entertainment’s biggest struggle is securing a reliable supply of DRAM and NAND flash memory, as both are high in demand.

Some Sony Interactive Entertainment staff think the new console should be sold at a loss if necessary to match the price of Microsoft’s Xbox Series X, as the platform would profit from game software and online service sales, while others would prefer the hardware make a profit from the get-go, says the report.

While most of PlayStation 5’s components are reportedly locked down, including the “unusually expensive” cooling system to “make sure heat dissipation from the powerful chips housed inside the console isn’t an issue,” Bloomberg cites “several people with knowledge of the matter” who said that some previously planned features for a new mirror-less camera have been cancelled due to the constrained DRAM supply.

The coronavirus outbreak has reportedly had no impact so far on preparation for PlayStation 5 production, Sony Interactive Entertainment has apparently yet to decide how many units it will make in the first year.

Bloomberg cites “people within the PlayStation business” who said a key factor in determining the price point of PlayStation 5 will be how Microsoft prices Xbox Series X.

The outlet also reports that many of the games launched for PlayStation 5 will also be available to play on PlayStation 4.

There is reportedly pressure from Sony Corporation CFO Hiroki Totoki to provide more transparency and information in the lead-up to PlayStation 5’s launch this holiday season, which has led to some internal distress. Totoki said that Sony’s plan to provide guidance on the gaming business outlook for the new fiscal year is no different from the recent past, meaning said guidance can be expected at the end of April.

Outside of PlayStation 5, Bloomberg reports that Sony Interactive Entertainment also plans to release a new version of PlayStation VR sometime after PlayStation 5 goes on sale.



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How much do they plan on selling the console for if its only $450 to make? Wouldn't $500 or $550 be enough? Or do they plan on trying to make a shit ton of profit buy selling it at $600 to $800?



Azzanation said:
How much do they plan on selling the console for if its only $450 to make? Wouldn't $500 or $550 be enough? Or do they plan on trying to make a shit ton of profit buy selling it at $600 to $800?

If it cost that much to make they would sell it for $400 to $500

$500 is the ceiling if you don't have a cheaper option like Xbox will.  PS4 cost just under $400 to make at launch and quickly turned profitable as part prices came down.  They sell at a loss or slight profit on the console because then they make money on every game and every purchase you make on PS store and from PS+



I am Iron Man

Azzanation said:
How much do they plan on selling the console for if its only $450 to make? Wouldn't $500 or $550 be enough? Or do they plan on trying to make a shit ton of profit buy selling it at $600 to $800?

Most likely they will either sell at a small loss at $400, with the intention to make back what they lose with subscriptions and game & accessory sales, or sell it at $500, possibly with a bundled game. All signs point to Xbox Series X being more powerful than PS5 and more expensive to build, so they will want to have a lower price than Microsoft most likely, so that they don't have a weaker console at the same price, so they may sell at a small loss at $400. The question is, how will MS respond, will they be ok with Xbox Series X costing more than PS5, as long as Lockhart/Series S is cheaper than PS5, or will they aim for price parity with PS5 as well as having a cheaper option with Lockhart/Series S? I could easily see Lockhart Series S at $300-350, PS5 at $400, and Series X at $500, but I don't think that Series X will sell for $100 more than PS5 unless Lockhart is real and is cheaper than PS5. 



Robert_Downey_Jr. said:
Azzanation said:
How much do they plan on selling the console for if its only $450 to make? Wouldn't $500 or $550 be enough? Or do they plan on trying to make a shit ton of profit buy selling it at $600 to $800?

If it cost that much to make they would sell it for $400 to $500

$500 is the ceiling if you don't have a cheaper option like Xbox will.  PS4 cost just under $400 to make at launch and quickly turned profitable as part prices came down.  They sell at a loss or slight profit on the console because then they make money on every game and every purchase you make on PS store and from PS+

There's no word on that from MS.

shikamaru317 said:
Azzanation said:
How much do they plan on selling the console for if its only $450 to make? Wouldn't $500 or $550 be enough? Or do they plan on trying to make a shit ton of profit buy selling it at $600 to $800?

Most likely they will either sell at a small loss at $400, with the intention to make back what they lose with subscriptions and game & accessory sales, or sell it at $500, possibly with a bundled game. All signs point to Xbox Series X being more powerful than PS5 and more expensive to build, so they will want to have a lower price than Microsoft most likely, so that they don't have a weaker console at the same price, so they may sell at a small loss at $400. The question is, how will MS respond, will they be ok with Xbox Series X costing more than PS5, as long as Lockhart/Series S is cheaper than PS5, or will they aim for price parity with PS5 as well as having a cheaper option with Lockhart/Series S? I could easily see Lockhart Series S at $300-350, PS5 at $400, and Series X at $500, but I don't think that Series X will sell for $100 more than PS5 unless Lockhart is real and is cheaper than PS5. 

Seriously, that wouldn't be a small loss, it would be huge.



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Wouldn't be surprised if MS is facing the same issues with Xbox.



Nu-13 said:
Robert_Downey_Jr. said:

If it cost that much to make they would sell it for $400 to $500

$500 is the ceiling if you don't have a cheaper option like Xbox will.  PS4 cost just under $400 to make at launch and quickly turned profitable as part prices came down.  They sell at a loss or slight profit on the console because then they make money on every game and every purchase you make on PS store and from PS+

There's no word on that from MS.

shikamaru317 said:

Most likely they will either sell at a small loss at $400, with the intention to make back what they lose with subscriptions and game & accessory sales, or sell it at $500, possibly with a bundled game. All signs point to Xbox Series X being more powerful than PS5 and more expensive to build, so they will want to have a lower price than Microsoft most likely, so that they don't have a weaker console at the same price, so they may sell at a small loss at $400. The question is, how will MS respond, will they be ok with Xbox Series X costing more than PS5, as long as Lockhart/Series S is cheaper than PS5, or will they aim for price parity with PS5 as well as having a cheaper option with Lockhart/Series S? I could easily see Lockhart Series S at $300-350, PS5 at $400, and Series X at $500, but I don't think that Series X will sell for $100 more than PS5 unless Lockhart is real and is cheaper than PS5. 

Seriously, that wouldn't be a small loss, it would be huge.

Not really. PS3 was sold at something like a $150-200 loss early gen as I recall. A $50 loss per console is chump change compared to that, especially since accessories like extra controllers, official headsets, etc. are all sold with quite a bit of mark-up (I believe game controllers cost less than $20 to make, but are sold for $50). It's also worth noting that more console game sales are digital than ever before, and the profit margin on digital games is higher than on physical games. And course they have PS+ subs and PS Now subs making them money as well. They can easily offset a $50 loss on hardware early gen between all of those sources of revenue.

Last edited by shikamaru317 - 2 days ago

method114 said:
Wouldn't be surprised if MS is facing the same issues with Xbox.

Most likely. Industry analyst Zhuge is estimating the current build cost of Xbox Series X at somewhere in the $460-520 range, based on the current cost of parts, with the rumored specs for Series X.



shikamaru317 said:
Nu-13 said:

There's no word on that from MS.

Seriously, that wouldn't be a small loss, it would be huge.

Not really. PS3 was sold at something like a $150-200 loss early gen as I recall. A $50 loss per console is chump change compared to that, especially since accessories like extra controllers, official headsets, etc. are all sold with quite a bit of mark-up (I believe game controllers cost less than $20 to make, but are sold for $50). It's also worth noting that more console game sales are digital than ever before, and the profit margin on digital games is higher than on physical games. And course they have PS+ subs and PS Now subs making them money as well. They can easily offset a $50 loss on hardware early gen between all of those sources of revenue.

A smaller loss than a colossal one doesn't make it small and it wouldn't be $50 (which would still be a lot).



The main problem here that I can see is, every time sony tiried to sell hardware thats either too expensive or sells at a loss, failed. thats the case with the ps3(they recoverd, sure, but thats after they did drastic measures to bring the price down like cutting entier BC chips) or the vita (vita and 3ds were overpriced for the market, but the 3ds had a tonn of headroom to cut prices while the vita literally couldn't do so)...
if MS comes out with both a cheaper and a more expensive option, sony becomes trapped between a powerful console quality handheld with enough specs to satisfy japanese devs, a cheap home console, and a ore powerful one, with no obvious way out.