Sony takes loss on PS3

Nov. 18, 2006
By JOSEPH M. DELEON News-Post Staff
jdeleon@fredericknewspost.com
  

FREDERICK — Sony Corporation, makers of the PlayStation 3 video game console released Friday, is taking a considerable loss on each unit sold, according to a report from iSuppli Corporation, an electronics supply chain market research firm.

In a service known as a teardown analysis, iSuppli frequently disassembles and studies electronic devices to gauge the quality of manufacturing and how much the units cost to build; the company then determines how competitive it is compared with similar products.

The materials and manufacturing costs for the 20-gigabyte PS3 exceed the suggested retail price of $499 by a total of $306.85, according to iSuppli's teardown analysis. For the 60-gigabyte version, costs exceed the $599 price by $241.35.

Sony expects to make up for the loss with video game sales, licensing and by streamlining the manufacturing process as demand for the console rises.

"With the PlayStation 3, you are getting the performance of a supercomputer at the price of an entry-level PC," said Andrew Rassweiler, teardown services manager and senior analyst for iSuppli.

Microsoft's Xbox 360, the closest game console rival, costs $323.30 to make — $75.70 less than the $399 suggested retail price.

The dissection shows Sony has delivered a high level of performance for the cost, including dual graphics processing units, the equivalent computing power of eight individual microprocessors and two gigabytes of RAM.

"The reason why the PlayStation 3 is so costly to produce is because it has incredible processing power," Mr. Rassweiler said. "If someone had shown me the PlayStation 3 motherboard from afar without telling me what it was, I would have assumed it was for a network switch or an enterprise server."