thats an unfair comparision because at launch there was already a model launched a $499 aswell, why didnt he compare that? im sorry i have to disagree on that one. you can call it a $200 price cut when its a totally different model. the model that was priced $599 at launch does not have the same features as the model that is priced $399 today.

DOATS1 said: thats an unfair comparision because at launch there was already a model launched a $499 aswell, why didnt he compare that? im sorry i have to disagree on that one. you can call it a $200 price cut when its a totally different model. the model that was priced $599 at launch does not have the same features as the model that is priced $399 today.

Check the estimate, it accounts for removed features, but I agree that it isn't really the best comparison.  And I assume the $599 model is used because Isupply estimated the difference in cost between it and the $499 20GB model was less than $100(So Sony's lost the least on the 60GB model).  I don't think the 40GB's lack of features accounts for the $100 difference in price from the 80GB now, so I think a better comparison would be an estimate of the $499 80GB.

Noobie said: i did a little research on it and i find that probably they r losing in the range of 25 - 50 per console and by the March they might have another US$ 50 off while still managing to break even with the console. Actuall iSupply Data was used in the original analysis and they estimated the cost for the July - August period for the first batch of PS3. Link for the original article http://www.isuppli.com/news/default.asp?id=6919 I will be estimating the cost for current October period. So it will make it like 15 months difference.. Component ---------- Original Price - - - - - - - My Current estimate Nvidia RS - - - - - - - 129 - - - - - - - 80 (original estimate in my view was high due to the low yield but with supposedly better yield after 15 months and adding 20% cost reduction after 15 months i think it should be less than 80) Cell Proc - - - - - - - 89 - - - - - - - 45 (original was for 90 nm... Sony updated the processor to 65nm, so price cuts by half whenever there is die shrink.. normal fabrication rule i would say) I/O Bridge - - - - - 59 - - - - - - - 40 (straight 20% price reduction over 15 months plus u have remember that sony removed Emotion Engine and GC for backward compatibility which must have reduced circuit complexit.) EE & BC - - - - - -- 27 - - - - - - - 0 (not present in 40 GB model) XDR Mem - - - - -- 48 - - - - - - - 40 Other - - - - - - - 148 - - - - - - - 120 Blue T - - - - - - - 4.10 - - - - - - 4. 802.11 - - - - - - 15.50 - - - - - - - 12.00 Other - - - - - - - 2.5 - - - - - - - 2.0 Mem Card - - - - 5.0 - - - - - - - 4.0 BR Diode - - - - - 125 - - - - - - - 20 (Sony officially stated that they have increased the production and reduce the cost substantially which i think is right as we are seeing BR players for less than 250 from more than 1 Manufacture.. so the diode is one small part of the player and i m sure it should not be more than 20 at any cost for Sony) HDD - - - - - - - 54 - - - - - - - 35 PSU - - - - - - - 37 - - - - - - - 25 (the new SKU i think has a smaller PSU as the power requirement has come down in 40 GB model) CMM - - - - - - 22 - - - - - - - 15 (lesser heat has reduced much stress on cooling) EH - - - - - - - 31 - - - - - - - 25 Misc - - - - - - 1.75 - - - - - - 1.5 MC - - - - - - - 40 - - - - - - - 35 Total - - - - - 840 - - - - - - - 503.5 Take these number with huge amount of salt..:) But i will like to clearify few things... Sony went with the reduction of Cell processor from 90nm to 65nm instead of the Nvidia graphics minitiarization and if we apply common sense this means that the cost of Cell was higher than the Cost of Nvidia graphics... other reason could be that initially Nvidia graphics initially had a very high rate of defect which was the reason for high cost cuz i don;t think that 7900 GT equivalent chipset should be this expensive when 7900 GT card is for around $120... so i think they have the cost down to around US 50. Blu Ray Diode price could be higher than 20 but i personally read somewhere that they have got it to around 8... but i don't find that source again but if u read the following link they have mentioned that by reducing the cost of Blu ray they r expecting at a direct $100 reduction... http://arstechnica.com/news.ars/post/20070615-sony-ps3-a-price-cut-candidate-perhaps-by-christmas-sony-ceo.html But it could be off. i don;t find motherboard in the iSupply data, they either have it included in the I/O or in the other cost... but by removing the Backward Compatibility Sony must have saved more than US $50 else i don;t think they would have gone with the chopping of Backward Compatability as it is one of the thing they have always claimed heavily.. So the cost must have to justify it.. So i have removed 27 from the EE & BC but some $10 from I/O.. but i think they could have save quite a bit in Other cost also by removed this Backward Comatibility. Lastly i think for the first 15 months 20% reduction is a bit consertive as initially the defects r high, So the reduction in price comes at much higher pace initially but after 2 years it sort of levelled off. So i won;t be surprised if in some components like RAM and I/O component they have managed to save more... cuz i don;t think after 2 years they will be reducing much cost on these components.. Once again its a rough estimate but i have tried to be as objective and logical as possible... And one last request can we just stop having this argument that Sony reduced the Price by $200 or $100... Sony initial price was $499 and $599 and now it stands at $399 and $499... i think that look a lot more objective and logical to me... u want to call it $200 price drop its ok with me.. but if my maths doesn't agree with yours then leave it... i think let it remains as a paradox of Maths for the future generation that how it is $200 price drop or $100 price drop. :)

Okay.   That $500 is a good starting point for cost.  Now let's look at the revenue side.

http://www.gamestop.com/search.asp?N=141+83

Gamestop offers a PS3 40G with SpiderMan3 movie pack in for $399.99.    The store wants to make money on the sale, even if Sony does not.  Say, 5% margin?   That's $20.  The movie disc doesn't cost too much, but the package around it does.  Maybe another $5?  Channel stuffing and GS not having to pay Sony for at least 30 days after the sale means finance charges to Sony.  The $500 cost for say 60 days, and the $375 for 30 @ 5%=$6 per PS3, but call it $5.  So now it's at $500 manufacture cost , for which Sony nets about $370. 

A $130 loss, plus the overhead costs that need to be assocated with the box.  Labor, shipping, home office (divisional), advertising, etc. 

 

 

 

Renar said: Noobie said: i did a little research on it and i find that probably they r losing in the range of 25 - 50 per console and by the March they might have another US$ 50 off while still managing to break even with the console. Actuall iSupply Data was used in the original analysis and they estimated the cost for the July - August period for the first batch of PS3. Link for the original article http://www.isuppli.com/news/default.asp?id=6919 I will be estimating the cost for current October period. So it will make it like 15 months difference.. Component ---------- Original Price - - - - - - - My Current estimate Nvidia RS - - - - - - - 129 - - - - - - - 80 (original estimate in my view was high due to the low yield but with supposedly better yield after 15 months and adding 20% cost reduction after 15 months i think it should be less than 80) Cell Proc - - - - - - - 89 - - - - - - - 45 (original was for 90 nm... Sony updated the processor to 65nm, so price cuts by half whenever there is die shrink.. normal fabrication rule i would say) I/O Bridge - - - - - 59 - - - - - - - 40 (straight 20% price reduction over 15 months plus u have remember that sony removed Emotion Engine and GC for backward compatibility which must have reduced circuit complexit.) EE & BC - - - - - -- 27 - - - - - - - 0 (not present in 40 GB model) XDR Mem - - - - -- 48 - - - - - - - 40 Other - - - - - - - 148 - - - - - - - 120 Blue T - - - - - - - 4.10 - - - - - - 4. 802.11 - - - - - - 15.50 - - - - - - - 12.00 Other - - - - - - - 2.5 - - - - - - - 2.0 Mem Card - - - - 5.0 - - - - - - - 4.0 BR Diode - - - - - 125 - - - - - - - 20 (Sony officially stated that they have increased the production and reduce the cost substantially which i think is right as we are seeing BR players for less than 250 from more than 1 Manufacture.. so the diode is one small part of the player and i m sure it should not be more than 20 at any cost for Sony) HDD - - - - - - - 54 - - - - - - - 35 PSU - - - - - - - 37 - - - - - - - 25 (the new SKU i think has a smaller PSU as the power requirement has come down in 40 GB model) CMM - - - - - - 22 - - - - - - - 15 (lesser heat has reduced much stress on cooling) EH - - - - - - - 31 - - - - - - - 25 Misc - - - - - - 1.75 - - - - - - 1.5 MC - - - - - - - 40 - - - - - - - 35 Total - - - - - 840 - - - - - - - 503.5 Take these number with huge amount of salt..:) But i will like to clearify few things... Sony went with the reduction of Cell processor from 90nm to 65nm instead of the Nvidia graphics minitiarization and if we apply common sense this means that the cost of Cell was higher than the Cost of Nvidia graphics... other reason could be that initially Nvidia graphics initially had a very high rate of defect which was the reason for high cost cuz i don;t think that 7900 GT equivalent chipset should be this expensive when 7900 GT card is for around $120... so i think they have the cost down to around US 50. Blu Ray Diode price could be higher than 20 but i personally read somewhere that they have got it to around 8... but i don't find that source again but if u read the following link they have mentioned that by reducing the cost of Blu ray they r expecting at a direct $100 reduction... http://arstechnica.com/news.ars/post/20070615-sony-ps3-a-price-cut-candidate-perhaps-by-christmas-sony-ceo.html But it could be off. i don;t find motherboard in the iSupply data, they either have it included in the I/O or in the other cost... but by removing the Backward Compatibility Sony must have saved more than US $50 else i don;t think they would have gone with the chopping of Backward Compatability as it is one of the thing they have always claimed heavily.. So the cost must have to justify it.. So i have removed 27 from the EE & BC but some $10 from I/O.. but i think they could have save quite a bit in Other cost also by removed this Backward Comatibility. Lastly i think for the first 15 months 20% reduction is a bit consertive as initially the defects r high, So the reduction in price comes at much higher pace initially but after 2 years it sort of levelled off. So i won;t be surprised if in some components like RAM and I/O component they have managed to save more... cuz i don;t think after 2 years they will be reducing much cost on these components.. Once again its a rough estimate but i have tried to be as objective and logical as possible... And one last request can we just stop having this argument that Sony reduced the Price by $200 or $100... Sony initial price was $499 and $599 and now it stands at $399 and $499... i think that look a lot more objective and logical to me... u want to call it $200 price drop its ok with me.. but if my maths doesn't agree with yours then leave it... i think let it remains as a paradox of Maths for the future generation that how it is $200 price drop or $100 price drop. :) Okay. That $500 is a good starting point for cost. Now let's look at the revenue side. http://www.gamestop.com/search.asp?N=141+83 Gamestop offers a PS3 40G with SpiderMan3 movie pack in for $399.99. The store wants to make money on the sale, even if Sony does not. Say, 5% margin? That's $20. The movie disc doesn't cost too much, but the package around it does. Maybe another $5? Channel stuffing and GS not having to pay Sony for at least 30 days after the sale means finance charges to Sony. The $500 cost for say 60 days, and the $375 for 30 @ 5%=$6 per PS3, but call it $5. So now it's at $500 manufacture cost , for which Sony nets about $370. A $130 loss, plus the overhead costs that need to be assocated with the box. Labor, shipping, home office (divisional), advertising, etc.

Ps3s _now_ in production cost about $360 (-8%/+5%) to _manufacture_, using 65nm parts (I have given some details for manufacturing costs in another thread which I'm too lazy to find again - old uninteresting bean counting stuff, anyways). The maximum _manufacturing_ costs never exceeded around $550 for the PS3. Now manufacturing costs do not equal production costs, which include R&D, factory setup costs, royalties, engineers etc etc. I once calculated the break-even point for the PS3 to approximately now (with $2B setup costs, requiring 8 Million PS3s sold at a varying loss), it seems that setup costs may actually be upto $3.5B, which would require about 12Million PS3 sold at a loss to achieve break-even point. This would again be in line with Sony who announced to break even around mid-2008.

What this means for customers is, essentially:

Japan/ANZO gets heavily financed by Europe, NA is around break-even soon. Nothing new here, European customers have been financing Japanese customers pretty much all the time for all kind of electronic equipment.. 

 

"The PlayStation 3's initial production cost is estimated to have been US$805.85 for the 20 GB model and US$840.35 for the 60 GB model;[55] however, they were priced at US$499 and US$599, respectively.[56] The high manufacturing costs meant that every unit was sold at a loss of approximately $250,[55] contributing to Sony's games division posting an operating loss of ¥232.3 billion (US$1.97 billion) in the fiscal year ending March 2007." - Wikipedia

Sorry for using Wikipedia as source, but I'm to lazy to find it somewhere else :)

Explosivo said: "The PlayStation 3's initial production cost is estimated to have been US$805.85 for the 20 GB model and US$840.35 for the 60 GB model;[55] however, they were priced at US$499 and US$599, respectively.[56] The high manufacturing costs meant that every unit was sold at a loss of approximately $250,[55] contributing to Sony's games division posting an operating loss of ¥232.3 billion (US$1.97 billion) in the fiscal year ending March 2007." - Wikipedia Sorry for using Wikipedia as source, but I'm to lazy to find it somewhere else :)

My colleagues and I always chuckle when we see coarse "estimates" that end in precise values given to the last cent (which is an immediate sign something is fishy). However, notice that the article plays with manufacturing/production costs without actually making a difference. The values turn out to be roughly the same as my values, since

Initial run of 6-7mio PS3s : manufacturing costs around $550, additional production costs $300 ($2B setup divided into 6-7mio units) = $850 

 

In one month aproximately we'll have the quarterly financial report and we'll know. In the meanwhile it's just speculating, the BOM on the consoles is quite a trade secret.

Well, I haven't read all the posts here, but I refuse to believe Sony's not losing any money with the PS3. I mean, just the Bluray-player would cost a lot, and all the other applications and functions on top of that... I think they're losing money. And a lot, too.

Renar said: Noobie said: i did a little research on it and i find that probably they r losing in the range of 25 - 50 per console and by the March they might have another US$ 50 off while still managing to break even with the console. Actuall iSupply Data was used in the original analysis and they estimated the cost for the July - August period for the first batch of PS3. Link for the original article http://www.isuppli.com/news/default.asp?id=6919 I will be estimating the cost for current October period. So it will make it like 15 months difference.. Component ---------- Original Price - - - - - - - My Current estimate Nvidia RS - - - - - - - 129 - - - - - - - 80 (original estimate in my view was high due to the low yield but with supposedly better yield after 15 months and adding 20% cost reduction after 15 months i think it should be less than 80) Cell Proc - - - - - - - 89 - - - - - - - 45 (original was for 90 nm... Sony updated the processor to 65nm, so price cuts by half whenever there is die shrink.. normal fabrication rule i would say) I/O Bridge - - - - - 59 - - - - - - - 40 (straight 20% price reduction over 15 months plus u have remember that sony removed Emotion Engine and GC for backward compatibility which must have reduced circuit complexit.) EE & BC - - - - - -- 27 - - - - - - - 0 (not present in 40 GB model) XDR Mem - - - - -- 48 - - - - - - - 40 Other - - - - - - - 148 - - - - - - - 120 Blue T - - - - - - - 4.10 - - - - - - 4. 802.11 - - - - - - 15.50 - - - - - - - 12.00 Other - - - - - - - 2.5 - - - - - - - 2.0 Mem Card - - - - 5.0 - - - - - - - 4.0 BR Diode - - - - - 125 - - - - - - - 20 (Sony officially stated that they have increased the production and reduce the cost substantially which i think is right as we are seeing BR players for less than 250 from more than 1 Manufacture.. so the diode is one small part of the player and i m sure it should not be more than 20 at any cost for Sony) HDD - - - - - - - 54 - - - - - - - 35 PSU - - - - - - - 37 - - - - - - - 25 (the new SKU i think has a smaller PSU as the power requirement has come down in 40 GB model) CMM - - - - - - 22 - - - - - - - 15 (lesser heat has reduced much stress on cooling) EH - - - - - - - 31 - - - - - - - 25 Misc - - - - - - 1.75 - - - - - - 1.5 MC - - - - - - - 40 - - - - - - - 35 Total - - - - - 840 - - - - - - - 503.5 Take these number with huge amount of salt..:) But i will like to clearify few things... Sony went with the reduction of Cell processor from 90nm to 65nm instead of the Nvidia graphics minitiarization and if we apply common sense this means that the cost of Cell was higher than the Cost of Nvidia graphics... other reason could be that initially Nvidia graphics initially had a very high rate of defect which was the reason for high cost cuz i don;t think that 7900 GT equivalent chipset should be this expensive when 7900 GT card is for around $120... so i think they have the cost down to around US 50. Blu Ray Diode price could be higher than 20 but i personally read somewhere that they have got it to around 8... but i don't find that source again but if u read the following link they have mentioned that by reducing the cost of Blu ray they r expecting at a direct $100 reduction... http://arstechnica.com/news.ars/post/20070615-sony-ps3-a-price-cut-candidate-perhaps-by-christmas-sony-ceo.html But it could be off. i don;t find motherboard in the iSupply data, they either have it included in the I/O or in the other cost... but by removing the Backward Compatibility Sony must have saved more than US $50 else i don;t think they would have gone with the chopping of Backward Compatability as it is one of the thing they have always claimed heavily.. So the cost must have to justify it.. So i have removed 27 from the EE & BC but some $10 from I/O.. but i think they could have save quite a bit in Other cost also by removed this Backward Comatibility. Lastly i think for the first 15 months 20% reduction is a bit consertive as initially the defects r high, So the reduction in price comes at much higher pace initially but after 2 years it sort of levelled off. So i won;t be surprised if in some components like RAM and I/O component they have managed to save more... cuz i don;t think after 2 years they will be reducing much cost on these components.. Once again its a rough estimate but i have tried to be as objective and logical as possible... And one last request can we just stop having this argument that Sony reduced the Price by $200 or $100... Sony initial price was $499 and $599 and now it stands at $399 and $499... i think that look a lot more objective and logical to me... u want to call it $200 price drop its ok with me.. but if my maths doesn't agree with yours then leave it... i think let it remains as a paradox of Maths for the future generation that how it is $200 price drop or $100 price drop. :) Okay.   That $500 is a good starting point for cost.  Now let's look at the revenue side. http://www.gamestop.com/search.asp?N=141+83 Gamestop offers a PS3 40G with SpiderMan3 movie pack in for $399.99.    The store wants to make money on the sale, even if Sony does not.  Say, 5% margin?   That's $20.  The movie disc doesn't cost too much, but the package around it does.  Maybe another $5?  Channel stuffing and GS not having to pay Sony for at least 30 days after the sale means finance charges to Sony.  The $500 cost for say 60 days, and the $375 for 30 @ 5%=$6 per PS3, but call it $5.  So now it's at $500 manufacture cost , for which Sony nets about $370.  A $130 loss, plus the overhead costs that need to be assocated with the box.  Labor, shipping, home office (divisional), advertising, etc.

You have good point there. and definitely this is just plain manufacturing cost. So there r other over heads like the retail cost, transportation and shipment then warranty so it will add up to like 25 - 30 per console more.

But as i said that Blu-ray diode should be costing less than US $10 and similarly Graphics part should have come out lower now as 7900GS like graphic card is available for US $120... so i don't believe the chipset should be more than US $60..

http://www.newegg.com/Product/Product.aspx?Item=N82E16814186013

I definitely don't have any inside knowledge neither i m going to stand by my estimates if somebody with better estimates can come up. and moreover i m more of a PC guy and into PC technology then a console guy but i do know that Intel with its Average selling price of like US $90 has a profit ratio of grater than 50% including all the manufacturing, research, administrative and other over heads and once my computer architecture teacher did tell the class that manufacturing of the chips for the processor doesn't cost more than US $5.

So definitely i m not expecting Sony to be paying like > US$30 for the manufacturing alone for any chip.

 Btw i don't get any cut from the Sony on proving that its loss per console is less than US $100 or more than US $100. :) but i will definitely like to participate in an educated discussion.

HappySqurriel said: I'm sorry, your estimate is not very good... Lets use nice round numbers for the RSX and Cell: The RSX initially cost Sony $100 ($75 physical manufacturing cost, $25 Licencing/profit) The Cell initially cost Sony $100 ($90 physical manufacturing cost, $10 Licencing/profit) The Cell has a lower licencing fee because Sony is involved on its R&D and will likely pay for most of its future development. Now, assume Sony moves to the 65nm process for these processors: The RSX now costs $62.5 ($37.5 Phyiscal cost, $25 Licencing/profit) The Cell now costs $65 ($10 R&D, $45 Physical cost, $10 Licencing) The $10 R&D cost on the Cell represents the $100 Million Sony would have to spend on the Cell to prepare it for the 65nm process spread out over the initial 10 Million consoles sold at this price ... Basically, with my round numbers you can see that Sony could save about 35% of the cost of two of the components that will drop in price the fastest by now; overall an estimate of 20% to 25% is much more realistic. Being that Analysts initially estimated the PS3 as costing $800 to product a 25% reduction would put it at $600, and a 33% price reduction would have it at $525.

You do have a very good point and i agree that Sony will be paying a royalty on Graphic chip.. So it will not be having lot of saving there. But i think i have not reduced the Graphic price too much. So i don't think it should effect my estimate much... $80 is still a lot of money when you r thinking of orders of millions. and OEMS have to pay like 10 - 20% of wot a customer pays on newegg or bestbuy for that particular item. So the prices r unexpectedly low for them . But i think 80 is not a bad guess.

But for the Cell i don't think i agree with you regarding the royalty. I don't think one has to give a royalty in co-developed product if all entities are equally participating. But if you have a source then i will glady like to be corrected. But my gut feeling says that Sony is not paying royalty on cell chip. Btw IBM is also using it on its server and i think they r getting good demand for it. So if Sony is paying then does IBM also has to pay royalty?