Bloomberg: PlayStation 5's Bill of Materials have been pushed up to $450 due to scarce NAND and DRAM components

modiz

Member
Oct 8, 2018
8,501

Scarce components have pushed the manufacturing costs for Sony Corp.’s next PlayStation to around $450 per unit, forcing a difficult price-setting decision in its battle with Microsoft Corp., according to people with knowledge of the matter.



The Japanese conglomerate is preparing to gradually replace the six-year-old PS4 console, releasing its PlayStation 5 the same holiday season its archrival debuts the upcoming Xbox Series X. Sony typically finalizes a console’s price in February of the release year, followed by mass production in the spring. With the PS5, the company is taking a wait-and-see approach, said the people, asking not to be named because the details are private.



The PS4, released in 2013 at a retail price of $399, was estimated by IHS Markit to cost $381 to manufacture. With the $450 unit cost and a similar gross margin, the PlayStation 5’s retail price would have to be at least $470. That would be a hard sell to consumers, considering Sony’s most expensive machine now is the $399.99 PS4 Pro and is often discounted, according to Macquarie Capital analyst Damian Thong.
The company’s biggest headache is ensuring a reliable supply of DRAM and NAND flash memory, with both in high demand as smartphone makers gear up for fifth-generation devices, according to people familiar with Sony’s operations. Samsung Electronics Co. just announced its Galaxy S20 product range, each variant of which will have 5G and a minimum of 12GB of RAM in the U.S.
Most of the components for the console have been locked down, the people said, including the cooling system, which is unusually expensive at a few dollars per unit. Typically, companies would spend less than a dollar, but Sony opted to lavish more on making sure heat dissipation from the powerful chips housed inside the console isn’t an issue.
The ongoing coronavirus outbreak has had no impact so far on preparations for PlayStation 5 production, they said. The company has yet to decided how many PlayStation 5 units it will make in the first year, they added.

Separately, Sony plans to release a new version of the PlayStation VR virtual-reality headset, tentatively scheduled after the PlayStation 5 goes on sale, the people said.
People within the PlayStation business unit said a key factor in deciding the ultimate PlayStation 5 retail price will be where Microsoft sets its price for the next-generation Xbox Series X. Microsoft is widely expected to hold that information back until the E3 gaming expo in Los Angeles in June.
There is pressure from CFO Totoki for Sony to provide more transparency and information in the buildup to the PS5’s release, which has caused some consternation internally.
 

Syriel

Member
Dec 13, 2017
6,978
"We want consumers to think to themselves 'I will work more hours to buy one.' We want people to feel that they want it, irrespective of anything else."
 

LossAversion

Member
Oct 28, 2017
4,229
I guess they're waiting to see if they can get away with $499 or if they need to sell at a loss for the first few years and go with $449 to stay lower than the Series X. Either way... at least it's not $599!
 
Oct 25, 2017
796
Detroit
The PS4, released in 2013 at a retail price of $399, was estimated by IHS Markit to cost $381 to manufacture. With the $450 unit cost and a similar gross margin, the PlayStation 5’s retail price would have to be at least $470. That would be a hard sell to consumers, considering Sony’s most expensive machine now is the $399.99 PS4 Pro and is often discounted, according to Macquarie Capital analyst Damian Thong.
So should we expect a $499 price tag or would $399 be feasible /w a loss?
 

ShadowFox08

Member
Nov 25, 2017
2,536
Not sure why they mentioned mobile. At least when it comes to RAM, ps5 ram is completely different from the LPDDR4x or LPDDR5 RAM used in mobiles. Even the storage too. Much higher capacity.

Anyway, I can see $500 price. They will sell at a loss in the first year regardless
 

Serene

Community Resettler
Member
Oct 25, 2017
41,130
Does MS not have to deal with the same scarce components issue?
Yes, but MS has two alternative solutions. The fact that they are doing the lower-spec version of the console, plus them offering the monthly payment plan with All Access. Sony to this point only really has the PS5 as it is.
 

Remark

Member
Oct 27, 2017
1,372
The PS3 was $599 because each unit cost something like $800. A $450 unit cost doesn't get you to $599. $499 makes more sense unless Sony is willing to take a loss on HW initially.
The way it's sounding even at $499 Sony will be taking a loss.

I would be very surprised if Sony launched at $450 or especially $399
 
Oct 30, 2017
77
You read this rumor filled report and this is the number you gleamed from it?
It doesn't seem that unreasonable. 450 for just BOM doesn't include the overhead to build the consoles, ship them out, retailer cut. It will probably end up being cheaper and Sony taking a hit so we don't repeat the PS3 men's, but 599 sounds like a price Sony would actually want to sell it at.
 

Jiggy

Avenger
Oct 25, 2017
5,329
wherever
The way it's sounding even at $499 Sony will be taking a loss.

I would be very surprised if Sony launched at $450 or especially $399
PS+ has become massive enough that Sony can probably live with hardware losses for a year or so, it sounds like they don't want Microsoft to undercut them. I feel like both consoles will start at $499.
 
Aug 23, 2018
424
Wait. Canceled camera feature? We’re they going to try and win over the Kinect fans who have had no home since Phil killed it in 2014??
 

Remark

Member
Oct 27, 2017
1,372
PS+ has become massive enough that Sony can probably live with hardware losses for a year or so, it sounds like they don't want Microsoft to undercut them. I feel like both consoles will start at $499.
This is where I'm at with it.

No way are either companies gonna take that big of a loss for extra hardware sales imo. Both will launch at the same price.
 

Desma

Member
Oct 27, 2017
727
Most of the components for the console have been locked down, the people said, including the cooling system, which is unusually expensive at a few dollars per unit. Typically, companies would spend less than a dollar, but Sony opted to lavish more on making sure heat dissipation from the powerful chips housed inside the console isn’t an issue.
I sure hope that means the PS5 won't be as noisy as the PS4, it's one of my biggest gripes with the PS4
 

Camp1nCarl

Member
Oct 25, 2017
412
Very interesting. I can't see either the new Xbox or PS5 launching at or under $399. More realistically expecting somewhere in the $450-$599 ballpark for both consoles.
 

Windu

Member
Oct 25, 2017
6,387
They get a cut of every digital purchase on their platform and charge people for online play which is almost pure profit for them. I think they will be fine taking a loss upfront.
 

ducktape

Member
Oct 25, 2017
5,118
The canceled camera features aren’t related to the PS5, so I’m not concerned about that. My only concern is about a PS5 delay, which I hope doesn’t happen.
 

mikehaggar

Developer at Pixel Arc Studios
Verified
Oct 26, 2017
671
Harrisburg, Pa
At this point I'm expecting both the PS5 and Xbox Series X to be $500 and marketed as the new "Pro" or "X" model while both Sony and Microsoft make it clear that all of your favorite franchises will still release new installments for your PS4 or Xbox One.
 

Sedated

Member
Apr 13, 2018
1,847
The cross gen games probs mean most of the stuff releasing outside of first party will be cross gen which was the case this gen as well. Who skips 150mil username?

Those BOMs are high. 500+ here we go
 

bsigg

Member
Oct 25, 2017
10,404
Yoshida is all about MAU (which I'm assuming means he believes they can eat a loss based on attach rates), some other execs want to see profit on the hardware as soon as possible though.

Sony’s Chief Executive Officer Kenichiro Yoshida has said the business should be judged by the number of active users, not the number of hardware units sold. Some Sony games staff think it should sell the new console at a loss if necessary to match Microsoft’s price, while other Sony executives would prefer to make money as the company did with the PS4.