http://www.gamespot.com/news/6161925.html
Report: Sony losing hundreds on each PS3
iSuppli breakdown pegs cost of manufacturing $499 20GB console at $805, $599 60GB console at $840.
By Tor Thorsen, GameSpot
Posted Nov 16, 2006 4:52 pm PT
When the Xbox 360 went on sale last year, BusinessWeek commissioned tech researcher iSuppli to take apart the console and estimate how much it cost to manufacture. The firm concluded that, including all pack-in accessories (hard drive, controller, cables, and so on), each premium 360 set Microsoft back some $126. Before labor, just the parts it took to make the console cost $470--$71 more than the full-fledged system's $399 price tag.
This week, iSuppli conducted a similar cost-analysis study of the PlayStation 3--with even more shocking results. According to the study, the hardware for the 20-gigabyte PS3 costs $805.85 alone--$306.85 more than the stated list price of $499. The 60GB model hardware costs $840.35, $241.35 more than the $599 sticker price Sony announced at the Electronic Entertainment Expo earlier this year. (Note: Sony did not announce price points of $499.99 and $599.99 at E3, although some retailers list the consoles' prices as such.)
While Sony will lose hundreds of dollars on each console sold, this consumer hopes to make thousands on her PS3.
Neither of the iSuppli estimates includes the cost of the A/V cables, power cord, or Sixaxis controller that come bundled with both models of the PS3. The initial launch shipment will also come with a Blu-ray disc copy of the Will Ferrell comedy Talledega Nights. "The size of Sony's loss per unit is remarkable, even for the videogame console business," read the iSuppli report.
However, despite the steep price, iSuppli still thinks the PS3 delivers plenty of bang for a buyer's buck. "The reason why the PlayStation 3 is so costly to produce is because it has incredible processing power," said Andrew Rassweiler, teardown services manager and senior analyst for iSuppli. "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."
Though it had no breakdown of the Wii, this week's iSuppli study did comment on the cost of another next-gen console. Thanks to streamlined processes and ample component supplies, iSuppli estimates that Microsoft now makes $75.70 per Xbox 360 console.
OK, so it's an estimate based upon a guessed cost of components. I don't believe for a second that Sony is going to put a product on the market that costs them more to produce than they earn on the sale. In business that's called suicide. Without knowledge of Sony's negotiated prices with suppliers the guess is isn't worth much.
Now, having said that, I think they would they produce the first units at a loss expecting the unit price to drop at the manufacturing becomes more efficient. But according to iSuppli's analysis, Sony will never make a profit on the PS3. Sorry, I'm still skeptical.