Teardown finds Sony closer to breakeven on PS3

SAN FRANCISCO—The latest incarnation of Sony Corp.'s PlayStation 3 reduces hardware and manufacturing costs to near the breakeven point on the video game console, according to a teardown analysis performed by market research firm iSuppli Corp.
The new 120-Gbyte hard disk drive version of the PS3, released in September, carries a combined bill of materials and manufacturing/test cost of $336.27, according to iSuppli. At a new retail price of $299, the latest version comes closer to breaking even than any previous version of the product, iSuppi said.
"Since the introduction of the PlayStation 3 in late 2006, Sony has subsidized the price of every console sold, a deficit the company has made up for with game sales and royalties," said Andrew Rassweiler, director and principal analyst of teardown services for iSuppli, in a statement.
Rassweiler added that Sony has aggressively designed out costs with each new revision.
Still, Sony is taking a loss of $31.27 on each sale of the PS3 in the U.S., iSuppli noted. But the firm's teardown analysis services determined the that the previous-generation PS3 sold for $49.72 less than its manufacturing and materials cost, based on pricing from October 2008.

 ISuppli said the U.S. price for PS3 likely is somewhat lower than overall worldwide average. Ongoing reductions in component pricing will cause the materials cost to decline significantly in 2010, the firm said.

"In light of these factors, the PlayStation 3 probably is already at or near the tipping point for profitability," Rassweiler said.
According to Sony, 440,000 PlayStation 3 consoles were sold in the U.S. during the "Black Friday" week of Nov. 29, a record for the product.
The latest generation PS3 is significantly revised from previous versions, according to iSuppli. The major changes involve the use of less expensive semiconductors, a general redesign of the product and a reduction in the number of components in the console, the firm said.
The new version employs chips manufactured at the 65- and 45-nm technology nodes, iSuppli said. It features approximately 2,568 components, down from 4,048 in the original version, iSuppli said.
The Nvidia Reality Synthesizer remains the most expensive chip in the PlayStation 3, at $45.82, iSuppli said. But that's a 21 percent decline from the Reality Engine employed in the previous version of the PlayStation 3 hardware, based on pricing in October 2008, the firm said. ISuppli said it believes Sony is employing a 65-nm part, compared to the 90-nm part used in the initial version of the PlayStation 3 in October 2006.
 
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