PS3 Informer

Sony Still Losing Money on Every PS3 Slim

Sony is still taking a loss on each PS3 Slim it sells, although the news is not all bad. The company has managed to reduce costs enough that it is almost breaking even at the new lower price of $299 USD. According to market analysis firm isuppli, the new 120 GB version of the PlayStation 3 carries a manufacturing cost of $336.27. At a newly reduced retail price of $299, the latest version of the PlayStation 3 comes closer to breaking even than any previous version of the product. If this analysis is correct, then Sony loses about $31 USD each time a customer walks out of a shop with a PS3 console. The original PS3 cost $448 to manufacture back in December 2008.

"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, teardown services, for iSuppli. "However, with each new revision of the game console hardware, Sony has aggressively designed out costs to reach the hardware and manufacturing breakeven point as quickly as possible. The latest version of the PlayStation 3 manages to further reduce the loss, even with the U.S. price of the console having fallen by $100 during the past year."

iSuppli's teardown analysis accounts only for hardware and manufacturing costs and does not take into consideration other expenses such as software, box contents and royalties. Thus, the difference between the cost of the product and the U.S. price is probably greater than $31.27.

However, ongoing reductions in component pricing will eventually cause the materials cost to decline significantly in 2010.

"In light of these factors, the PlayStation 3 probably is already at or near the tipping point for profitability," the company said.

To reduce costs, this design of the latest-generation PlayStation 3 is significantly revised from previous versions. 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 new 'slim' version employs some critical semiconductors that are manufactured at the 65-nanometer and 45-nanometer nodes. Such chips are less expensive than those using older processes employed in previous-generation PlayStation 3 consoles.

The new chips also cut the power usage of the PlayStation 3, allowing design changes that reduce hardware costs. The new system cuts the energy budget nearly in half from the first-generation hardware as the new PS3 employs a 220-watt master power supply, compared to a 400-watt supply in the first version. The lower wattage reduces the cost of the power supply as well as other power and cooling components.

Given its extensive range of capabilities, the PlayStation 3 has always been a complex product with a large number of components. But the latest version is simplified considerably in terms of not only component and subsystem counts but also overall complexity. Excluding the controller and the box contents, the latest version of the PlayStation 3 includes approximately 2,568 components--down from 4,048 in the original version.

The Nvidia Reality Synthesizer remains the most expensive chip in the PlayStation 3, at $45.82. However, that's a 21 percent decline from the chip employed in the previous version of the PlayStation 3 hardware, based on pricing in October 2008. iSuppli believes Sony is employing a part that is made by using 65-nanometer technology, compared to 90 nanometer in the initial version of the PlayStation 3 in October 2006.

So it seems that from a consumer standpoint, Sony customers are still getting tremendous value for their money.