How do you know it's an asymptote? You can't predict manufacturing improvements and general price reductions across the board. GDDR5 will certainly go down as lower end gpus start getting more than 1 or 2 GB and the mass production of it for PS4's etc.

Do you see the graph above here ? This is what I mean by how we've already achieved most of the cost reductions gains with the 28nm process technology and it's mostly due to the fact that the process node is mature with high yields to boot to begin with when manufacturing the next gen consoles. Even if GDDR5 does get cheaper don't expect it to amount a whole lot of savings because that age is already over for the most part.

Even without manufacturing improvements the cost will go down just due to simple economics.

How so ? Manufacturing costs also dictate prices ... 

For 5 years?  Sorry, but I think you have gone a little nutty.  No way the PS4 will still be $300+ in 2019.  By then, a slim model will have been out for at least a year or so, which would significantly decrease the cost of manufacturing, allowing them to drop to $299 (if it hadn't already dropped before then) at its release, and definitely $249 after how long it will have been out by 2019. 

And yes, if MS is going to need fewer chips, they will have to spend much more per chip (they already do, even without the difference in quantity) than Sony will when ordering much more.  All manufacturing works this way.  So, there will be no change in this practice just because there has to be to be to fit your scenerio.  Same goes for GDDR5.  The more it it becomes the standard and is ordered in higher quantites, the cheaper it will become.  All electronics components work this way.  Something tells me you didn't truly think this through before posting.

And one VERY important fact you are dismissing in this whole outline, is that Sony and MS are fine with taking a small loss on the HW, as long as it allows them to stay competitive.  Sony is already making a profit off of the PS4 HW, as is MS on (at least) the One + Kinect SKU, and this is just a few months after launch.  So, Sony could probably afford to drop the price to $349, now, without taking much of a hit.  In about a year or so, they will probably be able to drop the price to $299 without taking much of a hit.  And so on. 

MS, is also going to start to get deperate as this year goes on, meaning they are going to want to undercut Sony's price.  Either by this year's Xmas, or by Xmas in 2015, they WILL drop the price to $349.  Sony will most likely follow suit.  Then, once MS is feeling even more heat in 2015, they will make another drop, either by Xmas 2015 or 2016, to $299.  Again, Sony will follow suit.  In other words, as soon as the companies can drop the price, while either breaking even or taking a small loss, they will enter into a pricing war.  Since MS already cut out Kinect and dropped the price this year, I expect them to wait until next year til they lower it, again.

I didn't say that the PS4 will cost over $300 for the next five years. I simply said that I don't see it going under $300 in the next five years. The only time I'll ever see the PS4 going below $300 is when the chip manufacturing industry makes it's move to 13.5nm extreme ultraviolet lithography. 

How much difference do you think it's honestly going to make just because Sony has more savings for ordering a larger volume of chips ? At it's worst xbox will set out to do 40 million and I only see the PS4 reaching 100 million realisitically. GDDR5 already gets ordered a lot as it is so I don't see it dropping much in price coupled with the fact that there will be no manufacturing advantages when moving to a more advanced process technology. Something tells me you haven't done a lot of reasearch on the future manufacturing costs in state of the art semiconductor foundries. 

You also happen to be missing an important fact as manufacturing costs will not go much lower in the future so I don't see how it will be possible to go under $300 without incurring massive losses. Did you even take your time of the day to read the very first post in this thread or try to make sense of it ? I'm almost certain that Sony would rather make money than appealing to the consumers completely as they would want to recoup the losses from last gen but I don't know about Microsoft ...

That won't happen as both Sony and Microsoft are looking to make a profit and they'd rather a duopoly than a destructive business like the original xbox or the PS3.

Well, I think I'm just going to bookmark this page and necrobump it in about two years, when we have a $299 PS4.  We'll see then if you still believe it will be another 3 years before we see a $249 SKU.

Alright then suit yourself ...

I've got no clue where people come up with the ridiculous things they say, but these APU's are not costing AMD $10, or $25. AMD has a 37% gross margin on their products for their past fiscal year. Furthermore, since the PS4 has released (which is a pretty substantial portion of AMD's sales), their gross margin has decreased to about 35%. Not 600%, not 300%, but 35% (which you may even deduce means the margin on PS4 parts is even lower than other items, thus lowering the overall %, but we will use 35% for simplicity).

So, what do you get for Cost of Sales (which does not include R&D) for the APU? With the numerous sites I've looked at, the APU is costing Sony ~$100, meaning it is costing AMD ~$65. I mean, if you figure in a 15% discount rate on the cash flows, you are talking likely over 90 million consoles in 7 years in order to recoup the $2 billion R&D at $35 gross margin per chip.

$65 in parts, and $35 to make back the R&D...there most certainly is not $25 available to lower the cost that Sony has to pay.

Can you explain to me why cost reductions being met has to mean new consoles and whatnot are just done being made? Just because something is going to cost more in the future doesn't mean it is just done being made. It just means that we will not continue to see more and more powerful computers releasing for cheaper and cheaper prices. Instead prices will just have to increase some to compensate for the additional power.