Sony Seen Losing Big Money on PS3 Hardware

Sony is taking a big loss on each PlayStation 3 console it sells, but end users are benefiting from "supercomputing performance" at the price of a cheap PC, according to research company iSuppli, which dismantled the console to analyze the parts inside.

Sony PlayStation 3
Sony PlayStation 3

Console makers often sell their hardware at a loss with the hope of profiting from the games that run on them. But Sony’s loss on each PlayStation 3 will be unusually deep, according to iSuppli’s estimates released Thursday.

The combined materials and manufacturing costs for each device come to US$805.85 for the model with a 20GB hard drive, excluding the cost of the controller, cables and packaging, iSuppli said.

With a suggested retail price of $499, that would mean Sony is taking a loss of $306.85 on each console it sells. The differential for the 60GB model is less, with the cost exceeding the price tag by $241.35.

By comparison, the materials and manufacturing costs for the HDD version of Microsoft’s rival device, the Xbox 360, are $323.30, iSuppli estimated. That’s less than the suggested retail price of $399.

"It’s common for video-game console makers to lose money on hardware, and make up for the loss via video game-title sales. Still, the size of Sony’s loss per unit is remarkable, even for the video-game console business," iSuppli said.

Most of the cost comes from the PlayStation 3 console’s processing power. The multicore Cell processor alone, which was codesigned by Sony, Toshiba and IBM, and is the gaming device’s main processing engine, accounts for about 10 percent of the cost of each machine, iSuppli said.

The research company also highlighted Sony’s use of dual graphics chips from Nvidia and Toshiba, and its use of four 512-megabit dynamic RAM chips from Samsung Electronics. Sony’s motherboard probably costs the company $500 in total, compared to $204 for the Xbox 360, iSuppli said.

This is all good news for customers, who get all that computing power for a relative bargain. iSuppli called the PlayStation 3 an "engineering masterpiece," with a motherboard that looks more like that of an enterprise server or network switch than a games console.

The console provides "more processing power and capability than any consumer electronics device in history," iSuppli said.

The PlayStation3 made its debut in Japan Saturday and is being rolled out worldwide this week and next.

-James Niccolai, IDG News Service (Paris Bureau)

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