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

Fabtacular

Member
Jul 11, 2019
199
Didn’t they take huge losses on Ps3 back when PS Plus wasn't a thing to make them a butt ton of money and their exclusives weren’t selling 10m+ copies yet?
The losses on the PS3 were attributable to three things:
  1. Cell Processor. This was back when consoles regularly featured custom silicon, instead of the more off-the-shelf x86 parts from today. The Cell processor was co-developed with IBM, and was aggressively designed to enable a generational leap in processing. Some think its still more powerful than current Intel CPUs: https://www.tweaktown.com/news/69167/guerrilla-dev-ps3s-cell-cpu-far-stronger-new-intel-cpus/index.html. At any rate, Cell was very expensive to design, and low yields made it very expensive to manufacture: https://www.theguardian.com/technology/blog/2006/jul/15/could1020yie
  2. PS2 Backwards Compatibility. The PS2 was (and is) the best-selling home console of all time, and Sony was eager to ensure that everyone who owned a PS2 would migrate to the PS3. Part of that plan was to ensure that the PS3 could play PS2 games. I believe that initially the idea was that the Cell processor would be so powerful that it would be able to run PS2 titles through emulation. But when that fell through, Sony declined to drop the backwards compatibility feature. Instead they simply added an entire PS2 chipset inside the PS3: https://www.engadget.com/2006/06/05/reason-437-for-all-that-bulk-ps3-has-a-ps2-inside/
  3. Blu-Ray. At the time of the PS3 launch, the format wars between HD-DVD (from Toshiba) and Blu-Ray (from Sony) were in full swing. Owning the license for DVD technology had been ridiculously profitable for Sony, as consumers the world over bought billions and billions of DVDs as they replaced their VHS collections with DVD versions. (Sony got something like 7.5 cents per DVD and $4 for every player sold.) And the PS2 and DVD had had a symbiotic relationship: One of the reasons that the PS2 sold so ridiculously well was that it was the cheapest DVD player you could buy in the late 90's. And because the PS2's gaming platform allowed them to subsidize the hardware cost, having all of these PS2-as-cheap-DVD-players out on the market spurred the adoption of DVD technology by the market. So Sony was extremely eager to replicate this dynamic with the PS3 and Blu-Ray. Of course, Blu-Ray technology was new and very expensive at the time, and using the PS3 as a trojan horse for help Sony/Blu-Ray win the format war added additional cost to the console.
At the end of the day, largely attributable to the items above, the PS3 was rumored to have a BOM of $840 for the original $599 "full fat" PS3, and approximately $805 on the $499 version, meaning it lost $240 and $306 on each unit sold, respectively.

Point being, Sony didn't take losses on the PS3 because they were being aggressive with pricing. They took losses because the console's cost was horrendously out of control, and it would have been suicidal to price the consoles for anything more than they did, what with the 360 and the 360 Core consoles cost $399 and $299 at launch.
 
Feb 10, 2018
17,018
Well if the cooling solution doesn't sound like a fucking airplane i'm all for it
I think they will use better more quiet fans but it might be console dependant like the 1X, the 1X was quite inconsistent, some were very quiet while others were more audible when the system was playing current gen 4k games.
 
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BitsandBytes

Member
Dec 16, 2017
3,656
I looked back to PS4 speculation and right after the reveal one of the first BOM estimates was $390-$430 (edit: excl shipping & packaging etc). Same time frame as now too.
 

LordBlodgett

Member
Jan 10, 2020
193
$399 might be possible with $450 right? They usually sell at loss right?
Other than the outlier that is the PS3 they usually sell at a small loss. $399 is probably losing around $80-100 per console, so not so slight.
PS4 BOM was $381, sold at $399 still lost money, but made it up in the first year
Xbox One BOM was $396 without Kinect, $471 with Kinect. Sold for $399 without Kinect, $499 with Kinect. Also sold at loss, but no idea for how long.
 

OldMuffin

Member
Nov 1, 2017
820
Slightly off topic, but are there any new rumours about when the dam thing is going to be revealed? The anticipation is killing me now 😭
 

Albert Penello

Verified
Nov 2, 2017
176
Redmond, WA
Would be great to have Albert Penello's take on this.
Some of the smaller details in the article don't make sense to me, although I can agree with the overall conclusions. I sort of said the same thing after their earnings call based on the comments from the CFO - things appear to be trending more expensive and $399 isn't a slam dunk. They would like to wait until Xbox announces price to make the call. I agree with this sentiment.

The actual dollars don't make sense to me because a $450 launch BOM wouldn't be a super hard pill to swallow to launch at $399 assuming they have line-of-sight for that to come down. I think it would need to be much higher for them to waiver like this.

Second, I don't recall cooling solutions being that cheap - even single components within the system. Still it seems hard to believe that cooling (even an exotic solution) would be something that drives up the price. I also don't believe they couldn't design around this issue. It's all memory, silicon yields, storage and spinning media. Those are the big areas. So a significant increase in memory pricing absolutely could be a driver.

My guess is that costs have gone up enough to put them in a weird spot. Depending on what you want to believe about performance - but if they are actually in a 9-10 vs. 12 situation, being at the same price isn't super fun. And if costs have gone up more than they expect, it could be very hard to get to a $100 delta.

That's my take anyway. I don't think it's a revelatory article, more just adding some texture to things that seem to be known.
 

DigSCCP

Member
Nov 16, 2017
1,784
And how does that affect Series X BoM.
I mean these components are going to be part of Series X too.
So now the battle would be who is willing to take the bigger lost per unit at release ?
 

BitsandBytes

Member
Dec 16, 2017
3,656
Some of the smaller details in the article don't make sense to me, although I can agree with the overall conclusions. I sort of said the same thing after their earnings call based on the comments from the CFO - things appear to be trending more expensive and $399 isn't a slam dunk. They would like to wait until Xbox announces price to make the call. I agree with this sentiment.

The actual dollars don't make sense to me because a $450 launch BOM wouldn't be a super hard pill to swallow to launch at $399 assuming they have line-of-sight for that to come down. I think it would need to be much higher for them to waiver like this.

Second, I don't recall cooling solutions being that cheap - even single components within the system. Still it seems hard to believe that cooling (even an exotic solution) would be something that drives up the price. I also don't believe they couldn't design around this issue. It's all memory, silicon yields, storage and spinning media. Those are the big areas. So a significant increase in memory pricing absolutely could be a driver.

My guess is that costs have gone up enough to put them in a weird spot. Depending on what you want to believe about performance - but if they are actually in a 9-10 vs. 12 situation, being at the same price isn't super fun. And if costs have gone up more than they expect, it could be very hard to get to a $100 delta.

That's my take anyway. I don't think it's a revelatory article, more just adding some texture to things that seem to be known.
Thanks for this insight, Albert.

About the article mentioning DRAM/NAND supply issues. I think it might be referring to the below linked article that was widely re-reported last month but I think it might be being a bit premature with supply issues and would think both Microsoft and Sony have long since secured supplies for GDDR6 and SSD NAND flash?

Trendforce said:
However, the demand for NAND Flash by game console SSDs will not materialize until after mid-2020. Game console SSDs are therefore not what primarily causes the current rise in NAND Flash contract prices.
Trendforce said:
Sony and Microsoft will enter their peak procurement period for components after mid-2020. As well, NVIDIA will start offering its new lineup of GPUs based on a new microarchitecture codenamed Ampere in 2H20. These factors are projected to trigger a massive rush to stock up on GDDR6 memory later this year.
 

DukeBlueBall

Member
Oct 27, 2017
3,534
Seattle, WA
It's all memory, silicon yields, storage and spinning media. Those are the big areas. So a significant increase in memory pricing absolutely could be a driver.
Based on the leaked Flute benchmarks, the memory modules used are top of the line 18gbps GDDR6 downclocked to 17gbps. 16 of those is probably a heavy fraction of the BOM. I wonder if 16 18gpbs chips is cheaper than 20 16gbps chips...
 

BitsandBytes

Member
Dec 16, 2017
3,656
I still think 499$ could be a problem for them, after the first months. 399$ would be ideal.
To give an idea of how sales tale off quickly: PS4 @ £349 sold 250K in the UK in the first weekend but then needed 5 further weeks to sell the next 250K. Some might argue supply issues but I don't remember it being a problem?

A £400-£500 price will slow things down even more I would think.
 

Remark

Member
Oct 27, 2017
1,373
I still think 499$ could be a problem for them, after the first months. 399$ would be ideal.
Would take longer than a few months to reliably drop to $399 if we're going off DRAM shortages and the cost of parts in general like the APU dropping in value.

Realistically they would stay at the $499 price point for about a year minimum.
 

huH1678

Member
Oct 30, 2017
882
To give an idea of how sales tale off quickly: PS4 @ £349 sold 250K in the UK in the first weekend but then needed 5 further weeks to sell the next 250K. Some might argue supply issues but I don't remember it being a problem?

A £400-£500 price will slow things down even more I would think.
You don't remember it being a problem but the PS4 was indeed supply constrained going into 2014. Sony had to allocate stock for the world, they couldn't even launch it in Japan at the same time because of supply issues.
 
Oct 25, 2017
6,734
Not as funny as I’m sure it sounded in your head but I guess let me explain. I understand the premise, what I mean is I would never in 1,000,000 years know (or give a fuck about) the difference in a system that has 10 flops vs 12 or whatever and it’s not important anyway without fun games.

And no, if I cared about specs I would buy a PC.
That is you though. Not everyone is tech illiterate or doesn't care about what they are buying outside of cost.

I noticed that too. We most definitely the did not get a high end console for $399 this generation. The CPU was a complete turd from the start and GPU was mid-low tier. The rumored specs for these consoles are MUCH better. Well worth the price increase if it happens.

If you want to put something on this I am more than game.
Me too.
 

BitsandBytes

Member
Dec 16, 2017
3,656
You don't remember it being a problem but the PS4 was indeed supply constrained going into 2014.
In the UK? Like I say I don't remember having to wait to get one. Another stat is that it took 9 months to reach a million in the UK so well after any supply issues.

The point is sales slow very quickly once pre-orders and initial sales are sated even at a perceived good price. A higher price will presumably fair worse.
 

____

Member
Oct 27, 2017
5,951
Miami, FL
That is you though. Not everyone is tech illiterate or doesn't care about what they are buying outside of cost.



I noticed that too. We most definitely the did not get a high end console for $399 this generation. The CPU was a complete turd from the start and GPU was mid-low tier. The rumored specs for these consoles are MUCH better. Well worth the price increase if it happens.



Me too.
You're misunderstanding. The average consumer thats buying a PlayStation is. Unless you imply that the average consumer would care more about a tf than the library of games.
 

haveheart

Member
Oct 25, 2017
1,108
In the UK? Like I say I don't remember having to wait to get one. Another stat is that it took 9 months to reach a million in the UK so well after any supply issues.

The point is sales slow very quickly once pre-orders and initial sales are sated even at a perceived good price. A higher price will presumably fair worse.
In Germany you could sell it for 800€ even three weeks after the release. So yeah, supply was limited.
 

BitsandBytes

Member
Dec 16, 2017
3,656
In Germany you could sell it for 800€ even three weeks after the release. So yeah, supply was limited.
Yeah I'm sure in various places there were shortages for the first couple of months but it wasn't universal and really bad like say the Switch.(I have a funny story about the Switch shortages I might tell some time).
 

Welfare

Member
Oct 26, 2017
2,215
In the UK? Like I say I don't remember having to wait to get one. Another stat is that it took 9 months to reach a million in the UK so well after any supply issues.

The point is sales slow very quickly once pre-orders and initial sales are sated even at a perceived good price. A higher price will presumably fair worse.
PS4 was supply constrained in most territories until late March 2014. UK was one of those markets.
 

Yerffej

Member
Oct 25, 2017
7,765
I noticed that too. We most definitely the did not get a high end console for $399 this generation. The CPU was a complete turd from the start and GPU was mid-low tier. The rumored specs for these consoles are MUCH better. Well worth the price increase if it happens.
Pretty sure he meant high end this year, for the same low price of 399.
 

RedMercury

Member
Dec 24, 2017
10,022
With how big it will sell they can afford a loss at the beginning to make it a more reasonable purchase. Above $400 considering tax will get you to at least $425 would be yikes.
 

TheRealTalker

Member
Oct 25, 2017
3,604
I think the big take away for me from this is that PSVR2 is in the works

of course most speculated their would be one but how it is stated I feel Sony was also developing the PS5 with the next PSVR in mind as on of the key things of consideration and development