Just as it did with the PlayStation 3 when it was released back in 2006, Sony is forsaking profits on the sales of its latest console, in the hope that a lower retail price will convince gamers to buy the PlayStation 4 (PS4) rather than Microsoft’s Xbox One.
Things aren’t quite so bad this time around – with the PS3, Sony actually sold its consoles at a loss, but it’s unlikely to get rich off the back of its successor either. According to a new teardown analysis from the research firm IHS, it’s believed that Sony is making just $18 on the sale of each PS4. The analysis looked at the price of the various components of the PS4, plus how much it costs to put them all altogether, before coming to the conclusion that each console costs $381 (around £240) to make, just shy of the $399 they retail for.
PS4 Teardown Analysis
To get down to the nitty-gritty, by far and away the most expensive components of games consoles are the chips that make them tick. In the case of the PS4, this contains a whopping 350mm2 AMD microprocessor that IHS estimated costs around $100, plus 16 individual memory chips that add on another $88 to the total cost. Aside from these components, there’s also the Seagate hard drive that costs $37, an optical drive that goes for around $28, and some more (wireless) chips from Marvell and Skyworks. Throw in the controller, which costs $18 to make, a few Qualcomm Bluetooth chips, a Bosch motion sensor chip and a Wolfson Microelectroncs audio chip, and the total sum of the PS4′s parts comes to $381, according to IHS.
For Sony at least, it’ll be glad that it’s at least making something off the sales of its consoles this time. Back in 2006, IHS did a similar teardown analysis of the PS3, revealing that the total cost of the console came to $805, despite its initial $599 retail price in the US. Of course the costs of manufacturing PS3s came down over time, but that didn’t stop Sony from slashing the console’s retail price when they did – as of 2009 it was still making a loss, with consoles selling for $299 despite it costing $336 to build them.
Andrew Rassweiler, the IHS analyst who oversaw the teardown, said that the PS4 would likely be even cheaper if Sony found a way to reduce manufacturing costs:
“Sony would build the PS4 at a reduced price if it were able to, and would likely also reduce its retail price, if history is any indicator of its strategy,” Rassweiler told technology site AllThingsD.
Of course, Sony’s strategy has never been to make money on sales of the console itself, but rather the games that we play on them.
“If manufacturing costs are only $10 or $20 shy of the retail prices, it’s unlikely that Sony will be able to make a profit on console sales at all,” Rassweiler continued. “Once again, for Sony, it’s all about selling games to turn a profit.”