Game console manufacturers are always in a precarious position at launch. The hardware will almost always be sold at a loss, and the platform holder must rely on software sales to make that money back. It was especially bad with the launch of the Xbox 360 and PS3, but it looks like Sony has reigned in its costs for this latest generation of consoles.
IHS reports in its latest teardown that the components that make up the PS4 only costs $372. When you factor in manufacturing costs, the total cost of the console jumps to $381. The console is sold for $399 at retail so you would assume that Sony is making money on each console sold. That’s not the case, however, as IHS points out a number of other costs will ensure that Sony takes a loss on each console sold at the outset. Fortunately for Sony, the low cost of the console also ensures that it will break even or even become profitable later down the line, unlike the PS3.
“This time, Sony is on a greatly shortened path to the hardware break-even point, or even profitability, with its cost-conscious PlayStation 4 design,” said Andrew Rassweiler, senior director, cost benchmarking services for IHS. “The company is pulling off this feat, despite offering a brand-new design that once again includes avant-garde components that yield superfast performance. The PlayStation 4 keeps a lid on costs by focusing all the additional expense on the processor and memory—and reducing outlays for the optical drive, the hard disk drive (HDD) and other subsystems.”
Interestingly enough, the teardown reveals that the PS4’s CPU and DRAM make up slightly more than half of the entire cost of the console at $188. In comparison, the PS3’s CPU and DRAM only made up 29 percent of the total cost of the console.
“Sony clearly has made the decision to focus on balancing the brains and economics of the console, with the processor and memory dominating both the design and the BOM,” said Jordan Selburn, senior principal analyst for consumer platforms at IHS. “This processor is a monster, with the surface area of the chip amounting to about 350 square millimeters. That is three times larger than any other chip manufactured using equivalent-process technology that has been examined by the IHS Teardown Analysis service. Despite the remarkable silicon acreage of this device, it comes at a price point attractive to mainstream consumers while delivering a very high level of performance. Future versions, manufactured with even more advanced semiconductor processing technology, will further enhance both cost and performance.”
Speaking of DRAM, IHS also notes that Sony’s use of GDDR5 RAM in the PS4 has led to the dramatic increase of cost of RAM compared to the PS3. Not only is Sony’s new console using 16 times the RAM of its predecessor, but it’s also using cutting edge technology compared to the DDR3 RAM that’s used in the Xbox 360, PS3 and Xbox One.
Despite these increase in costs for the CPU/GPU and RAM, IHS says that Sony was able to make a number of cost cutting measures in other parts of the console. For one, the Blu-ray drive in the PS4 only costs $28, compared to $66 in the PS3. Sony was also able to save money on the motherboard by “using a more integrated design” that reduced “the number of small-sized integrated circuits, discrete semiconductors and passive components.”
You can see a full breakdown of components below: