NJ5 said:
drkohler, I don't understand very well how you come up with the numbers for what you call "engineering". Does that include the whole cost of R&D for the PS3?
Isuppli's analysis doesn't do any similar breakdown, and they come up with a similar value ($840), how can that be? Did they spread the "engineering" costs all over the components price? I assumed that their component prices were based on what the components themselves would cost, without taking R&D into account. |
I do not know how Isupply gets to their values (but you have correctly realized it does not say development costs anywhere in their breakup), I do have one of their lists though. For example, it lists the following points amongst others:
Cooling/mounting hw $22
Enclosure/hardware $31
about 5 or 6 positions all called manufacturing/other..... all in all, it would seem that isupply values the cost of the plastic box /metal sheets around $60... Now what is the _real_ production price of that stuff?
Let's look at the initial production run of say 5 mio units. What we need to produce these components is:
The case: a plastic extruder + a high performance press + press form(s) that shape the molten plastic into the case form
The metal sheet stuff: a high performance press + stencil form(s) that punch the metal shields out of the sheet roll.
What you are willing to pay for it depends on where you produce this stuff. You do it fully automatic (typically in a high price country) with highly sophisticated machinery (read: expensive) and essentially zero manpower or you do it in a 'poor' country with lots of cheap (chinese?) worker slaves and cheap machines. Both ways have their advantages and disadvantages.
Now what I call engineering is a lump sum of the following sequence:
1. Some engineers design the case/the sheet metal stuff (usually in the lab)
2. Some engineers test the setup (note: this is apparently not required if you are Microsoft making Xboxes...)
3. If it is ok (if not, go back to 1.) someone decides on the production facility to produce the stuff. If you do it on your own, you need all of the above mentioned equipment, but usually there are companies that have extruders and/or presses in their factories. So you only need to engineer and produce the press forms that company needs. For plastic cases made out of extruded polypropylene and cheap sheet metal bits, these form can be made out of aluminium (harder stuff requires stainless steeel ewhich costs a lot more).
So: Engineering costs = everything mentioned above you pay upfront to be able to produce stuff. Production costs = cost of polypropylene/sheet metal/chinese worker slaves doing the cases.
What does a single case cost? If made by chinese worker slaves, around $2.80, say 3 bucks max.
What does the cooling stuff cost? The sheet(s) around $1, the fan is also a mass product in the $2-3 range. Add $2-3 for assembling/cleaning the stuff.
So the production costs is not $70, but around $8-9. Now that is not the final cost, since each of the 5 mio cases has to add 1/5'000'000 of the startup engineering costs mentioned above, which may add another $2-3. For the following batches, you do not need to add these costs, as you already have paid for it (and assuming the stuff didn't break. You also might keep some og the engineers in the project which adds a few cents).
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One of the critical components of the PS3 obviously is the blu-ray drive which is relatively difficult to estimate costs (I do not have a PS3 and I have not been able to examine one myself). However, there is nothing magic in the drive itself, it does not need magical technology just because the lens system now has a higher numerical aperture - the laser light is more strongly focussed than in an ordinary dvd drive which requires better precision since the lense is now almost in contact with the disk. What seems like a disadvantage is actually the bonus compared to HD-DVD. Having a high numerical aperture makes it easier to build re-writable systems. We have luck - Sony is the largest manufacturer of DVD drive systems, so they do know how to make and mass produce these drives and pickup systems. Since one can buy good quality dvd drives in the $30 ballpark, the production costs of a blu-ray drive can be estimated around $20 + cost of laser (Isupply has a value of $125 in its list, which is correct for the second batch of PS3s). So the price breakdown probably looks something like
First production run: $20 drive $100 diode $250 engineering costs
Second production run: $20 drive $100 diode
Newest run: $20 drive $5 diode
Note that when the second run (European PS3s) was ordered, the production yield of the blue diodes was still unsatisfactory which yields to the high diode price.
