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

BrickArts295

Member
Oct 26, 2017
4,742
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.
Good Lord $800! Krazy Ken was out of control XD
 

Version 3.0

Member
Oct 27, 2017
2,936
When were they considered toys? Your posts make no sense. Adjusted for inflation the NES was 430 dollars.
When were they considered toys? What a crazy question. Always. Forget about "adjusted for inflation". First, it's nonsense; not everything "inflates" at the same rate. I bought the NES at 15 with a weekend-only job that paid shit. It wasn't unaffordable at all.

Second, an expensive toy is still a toy. The 2600 and NES are what kids, including myself, wanted (and got) for Christmas in their time. The PS4 and Switch are what kids want now. And the PS5 and Xbox SX are what they'll ask for for Christmas this year. They're toys. Games are toys. As adults, we might like to call them by fancier names, but they're still toys.
 

MaulerX

Member
Oct 30, 2017
977
When were they considered toys? What a crazy question. Always. Forget about "adjusted for inflation". First, it's nonsense; not everything "inflates" at the same rate. I bought the NES at 15 with a weekend-only job that paid shit. It wasn't unaffordable at all.

Second, an expensive toy is still a toy. The 2600 and NES are what kids, including myself, wanted (and got) for Christmas in their time. The PS4 and Switch are what kids want now. And the PS5 and Xbox SX are what they'll ask for for Christmas this year. They're toys. Games are toys. As adults, we might like to call them by fancier names, but they're still toys.

Personally they stopped being toys the moment they were capable of playing your favorite porn DVD. Not to mention what you can access online with their web browsers. They're definitely not the "toys" they were when the 2600 and NES came around.
 

jaggies

Member
Oct 30, 2017
1,685
Personally they stopped being toys the moment they were capable of playing your favorite porn DVD.
What a bizarre comment. Toys aren't just for kids, you know.

PlayStations are absolutely pure leisure products. It's right in the name. They're playthings.

It's funny because people with ATVs, motorbikes, and jet-skis — other leisure products for adults, all of which are much more expensive than a PlayStation — refer to those as their "toys" all the time. But on Era people are all "my playstation is NOT a toy!! you can watch porn on it!!1"
 

MaulerX

Member
Oct 30, 2017
977
What a bizarre comment. Toys aren't just for kids, you know.

PlayStations are absolutely pure leisure products. It's right in the name. They're playthings.

It's funny because people with ATVs, motorbikes, and jet-skis — other leisure products for adults, all of which are much more expensive than a PlayStation — refer to those as their "toys" all the time. But on Era people are all "my playstation is NOT a toy!! you can watch porn on it!!1"

Of course anything can be your "toy". But that's not what we're talking about. Game consoles used to carry the stigma that they're toys.... for kids. And in that sense they're not. Not when you can access the aforementioned. At least not to me.
 

Liquid Snake

Member
Nov 10, 2017
1,196
Really cool that Albert Penello stopped by. If there’s anyone out there in a position to talk about the logistics of a console launch, he’s someone we should definitely listen to.

Back to the point though, I like that he still thinks it’s possible for a $399 launch price. If Sony doesn’t have the power advantage (or at least an equal amount of power) it would indeed be a tough sell for them to cost as much as a Series X. I don’t think Microsoft would have the audacity to match their $400 price point with the XseX even if Sony did go that low — that’s what Lockhart is for, guaranteed.
 
Oct 27, 2017
639
This seems to line up with my thoughts anyways that Sony has always prepared for a 399 launch with a similar setup to this generation and Microsoft is going to go beyond that with a 499 console and whatever top flight tech that can be put in those boxes at those price points. If any of this is true, both might be in a precarious spot but since Sony is highlighted here and 399 seems to be their sweet spot, I wonder how all of this is going to play out.
 

Adventureracing

The Fallen
Nov 7, 2017
2,933
This seems to line up with my thoughts anyways that Sony has always prepared for a 399 launch with a similar setup to this generation and Microsoft is going to go beyond that with a 499 console and whatever top flight tech that can be put in those boxes at those price points. If any of this is true, both might be in a precarious spot but since Sony is highlighted here and 399 seems to be their sweet spot, I wonder how all of this is going to play out.
Makes things interesting going into next gen. Really hard to tell how things will shake out.
 

thuway

Member
Oct 27, 2017
3,463
This news should also effect both Series X and Lockhart.

1.Series X if they were targeting 499 will now be 599.


2. Lockhart if they were targeting 299 will now be 399.



Component shortage isn't exclusive to one company.
 

Lozjam

Avenger
Nov 1, 2017
1,261
Okay.

So I think here is where it can stand.

Let's say your typical launch day buyer gets around 3 years of PS+ on average, throughout the life cycle of a system. That in itself is around 3 years, or $180 that PSN owners can have. They can kiss that goodbye if Xbox is the same price and more powerful. If Xbox starts to get momentum, that truly undercuts playstation and their profits. Because not only will they lose the sub if their player drops out, they will lose that sub for the rest of the generation. That's not to mention software sales cuts, digital sales in general, DLC, micro transactions, ect.

It is way better to take that $50-$100 cut, because they will truly make that back. Meanwhile, it is super important that Sony undercuts Microsoft. They kind of have to. Not only does console sales matter, but ecosystem are where Sony gets the most profit. If they start losing customers. Well, for each customer that jumps ship, on average, that probably like losing 180+ and complete software sales.
 

christocolus

Member
Oct 27, 2017
6,150
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.
Interesting stuff.
 

Herb Alpert

Member
Oct 25, 2017
6,121
Paris, France
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 sharing this.
Honest question cause I'm no expert at all, but how could they sell something 399 if the cost of components alone is 450? It doesn't take into account r&d, marketing, logistics or retailer margins... It seems like they would take a huge loss, wouldn't they ?
 

Fallout-NL

Member
Oct 30, 2017
2,572
Pretty sure he meant high end this year, for the same low price of 399.
No,

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.
This is indeed what I meant.

Actually hoping it'll be a bit more expensive this time around for that reason.
 

bane833

Member
Nov 3, 2017
4,167
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.
Lol the PS2 wasn´t even released in the late 90s let alone the cheapest DVD player. You could get a cheap DVD player for 50 in 2002, maybe twice that in late 2000 when the PS2 hit the western markets.
 

northnorth

Member
Dec 4, 2017
163
PS Direct the night after MS Presents at E3, $100 cheaper. Show the launch games. Tease what's coming. Done deal.

That said. Bleeding Edge is pure flames. I think they have something.
 

HeroR

Member
Dec 10, 2017
6,199
When were they considered toys? What a crazy question. Always. Forget about "adjusted for inflation". First, it's nonsense; not everything "inflates" at the same rate. I bought the NES at 15 with a weekend-only job that paid shit. It wasn't unaffordable at all.

Second, an expensive toy is still a toy. The 2600 and NES are what kids, including myself, wanted (and got) for Christmas in their time. The PS4 and Switch are what kids want now. And the PS5 and Xbox SX are what they'll ask for for Christmas this year. They're toys. Games are toys. As adults, we might like to call them by fancier names, but they're still toys.
That and Nintendo themselves regards gaming as a 'toy'. Nintendo is also a toy company that made stuff like Ultra Hand.

Lol the PS2 wasn´t even released in the late 90s let alone the cheapest DVD player. You could get a cheap DVD player for 50 in 2002, maybe twice that in late 2000 when the PS2 hit the western markets.
In Japan, it was definitely sold as a cheap DVD player. I mean, the most played thing on a Playstation 2 in Japan in its early years was Spiderman 2.
 

Jaypah

Member
Oct 27, 2017
1,528
Lol the PS2 wasn´t even released in the late 90s let alone the cheapest DVD player. You could get a cheap DVD player for 50 in 2002, maybe twice that in late 2000 when the PS2 hit the western markets.
That and Nintendo themselves regards gaming as a 'toy'. Nintendo is also a toy company that made stuff like Ultra Hand.



In Japan, it was definitely sold as a cheap DVD player. I mean, the most played thing on a Playstation 2 in Japan in its early years was Spiderman 2.
You could find DVD players in late 2000-early 2001 for $100. They weren't the greatest but we're talking about the cheapest. I'm not disputing that people in Japan watched a lot of Spiderman 2 (I wasn't there so I don't know) but it would probably be because there wasn't much compelling software early on as opposed to the reason being that it was the cheapest DVD player.
 

HeroR

Member
Dec 10, 2017
6,199
You could find DVD players in late 2000-early 2001 for $100. They weren't the greatest but we're talking about the cheapest.
Are we talking about the US or Japan? Because in Japan, DVD players were noticeably more expensive. Heck, DVDs themselves are still more expensive in Japan to the point that movies or popular anime on DVD don't really sell.
 

bane833

Member
Nov 3, 2017
4,167
In Japan, it was definitely sold as a cheap DVD player. I mean, the most played thing on a Playstation 2 in Japan in its early years was Spiderman 2.
Don't know about the japanese prices but the PS2 launched for over 400€ in Europe. A standard DVD player was nowhere near that price.
 

Jaypah

Member
Oct 27, 2017
1,528
Are we talking about the US or Japan? Because in Japan, DVD players were noticeably more expensive. Heck, DVDs themselves are still more expensive in Japan to the point that movies or popular anime on DVD don't really sell.
I can only speak from personal experience in the USA but I find it hard to believe that we had $100 DVD players and the cost in Japan was higher than the price of a PS2. But, again, I wasn't there so you may be correct.
 

HeroR

Member
Dec 10, 2017
6,199
I can only speak from personal experience in the USA but I find it hard to believe that we had $100 DVD players and the cost in Japan was higher than the price of a PS2. But, again, I wasn't there so you may be correct.
It was a long time ago, so I may have details wrong. I do remember the PS2 being considered a cheap DVD player in at least Japan during its early years, but could be cheap for the quality of the player. I believed that PS2 had a very good player for its price tag.
 

Jaypah

Member
Oct 27, 2017
1,528
It was a long time ago, so I may have details wrong. I do remember the PS2 being considered a cheap DVD player in at least Japan during its early years, but could be cheap for the quality of the player. I believed that PS2 had a very good player for its price tag.
It was a pretty good player for the price in the US so I could see that being the case in Japan too, especially if the price of their players skewed higher. You could get a comparable player for a bit less in the US but you also got a PS2 for games in the process (plus it had a "prestige" around it selling out and such) so I knew a lot of non-gamers who picked up a PS2 in the first year.
 

thuway

Member
Oct 27, 2017
3,463
$499 for PS5 and X make a Lockhart at $299 a mass market darling
LOL - do you understand that a shortage effects everyone? Lockhart's main differentiation wasn't the SSD but a cut down GPU.

A 499 PS5 means-

599 Series X (if they were targeting 499)

399 Lockhart (if they were targeting 299)



The victory laps being run because Sony has to increase price misses the point that Microsoft will also suffer the same sensitivities. There are no winners here unless you own stock in micron.
 

Ebtesam

Member
Apr 1, 2018
4,042
wait why i'm seeing 100$ difference now

it won't happen if the they are close to each other (+12Tf)
 

thuway

Member
Oct 27, 2017
3,463
wait why i'm seeing 100$ difference now

it won't happen if the they are close to each other (+12Tf)
That's the question.

Albert's analysis fails to mention that Microsoft will suffer similar headaches with pricing.


Both consoles will increase price by a similar margin if the component shortage is the SSD / DRAM.
 

Ebtesam

Member
Apr 1, 2018
4,042
That's the question.

Albert's analysis fails to mention that Microsoft will suffer similar headaches with pricing.


Both consoles will increase price by a similar margin if the component shortage is the SSD / DRAM.
Because he doesn't know if they suffer from the same problem or not? or he can't say anything about these coz of NDA.


but still i can't see a 100$ difference again
 

Alexandros

Member
Oct 26, 2017
8,328
As someone with zero interest in these consoles (I play on PC exclusively) I still find the whole process leading up to a console launch rather fascinating. There are not many other hardware markets where if you fumble a device's launch you're essentially screwed for seven or so years. Every other sector releases products at such a rapid pace that one year's disaster can turn into another year's triumph, yet in the console market you either get it completely right or you're straight up boned and have to wait many years for another chance.

As for the price point debate, I think that $499 is too much for what is essentially a single-purpose device for gaming. Yes, you can do other stuff on it but the rise of smart devices (especially smartphones) means that people already own multiple devices that can do all the extra stuff that a console does.
 
Oct 25, 2017
5,311
The Ocean
LOL - do you understand that a shortage effects everyone? Lockhart's main differentiation wasn't the SSD but a cut down GPU.

A 499 PS5 means-

599 Series X (if they were targeting 499)

399 Lockhart (if they were targeting 299)



The victory laps being run because Sony has to increase price misses the point that Microsoft will also suffer the same sensitivities. There are no winners here unless you own stock in micron.
Depends on how early those resources were signed and contracted for. If Microsoft knew what their needs were last year and bought in volume at X price then a shortage won’t hurt them as bad. It’s unlikely but possible given that for memory Apple had previously bought chips years in advance for mobile devices.
 

HeroR

Member
Dec 10, 2017
6,199
As someone with zero interest in these consoles (I play on PC exclusively) I still find the whole process leading up to a console launch rather fascinating. There are not many other hardware markets where if you fumble a device's launch you're essentially screwed for seven or so years. Every other sector releases products at such a rapid pace that one year's disaster can turn into another year's triumph, yet in the console market you either get it completely right or you're straight up boned and have to wait many years for another chance.

As for the price point debate, I think that $499 is too much for what is essentially a single-purpose device for gaming. Yes, you can do other stuff on it but the rise of smart devices (especially smartphones) means that people already own multiple devices that can do all the extra stuff that a console does.
Game systems can turn it around after a lackluster launch like the DS, 3DS, and even the Xbox 360 with the whole Red Ring of Death. Even the PS3 managed to turn around somewhat during its final years. It's just extremely hard since the gaming market tend to latch on to one system as the dominated, while every else get scraps. This time period is one of the few exceptions with the Switch and the PS4 both doing extremely well and breaking records. The only thing close was the SNES and Genesis in the US.
 

Sonicfan059

Member
Mar 4, 2018
2,693
This screams controlled leak to me. Allow this to get out and make MS think Sony is going to price it a certain way in order to undercut in price again.
 

No42.05W70.2

Banned
Jun 14, 2018
763
PS5 can easily pull off a $500 price point, as long as the specs compare favorably, or are on par with the Xbox equivalent.
 

thuway

Member
Oct 27, 2017
3,463
Depends on how early those resources were signed and contracted for. If Microsoft knew what their needs were last year and bought in volume at X price then a shortage won’t hurt them as bad. It’s unlikely but possible given that for memory Apple had previously bought chips years in advance for mobile devices.
I don't prescribe to this idea that Microsoft and / or Sony pulled a fast one whilst the competitor trip and fell on egg shells that increased price / lowered performance. That's nonsense.
 
LOL - do you understand that a shortage effects everyone? Lockhart's main differentiation wasn't the SSD but a cut down GPU.

A 499 PS5 means-

599 Series X (if they were targeting 499)

399 Lockhart (if they were targeting 299)



The victory laps being run because Sony has to increase price misses the point that Microsoft will also suffer the same sensitivities. There are no winners here unless you own stock in micron.
LOL

Now with that one out of the way, as per windowscentral

Surprisingly, there is no mention of Microsoft and its Xbox Series X console in this reporting. Microsoft's console also uses many high-end components, and its price is not expected to be as low as the One X or One S, which remain as options for consumers. Indeed, one report says that Series X's SSD may actually be DRAM-less – a first in this market – which could help Microsoft skirt this supply issue, at least partially. The solution for Microsoft, which is unconfirmed, is the reliance on Phison's newer PS5019-E19T flash memory controller.

With this said, there are possibilities that this affects Sony more than MS. So perhaps being ultra sure that both will be affected is a bit “High Horse:y”
 

Alexandros

Member
Oct 26, 2017
8,328
Game systems can turn it around after a lackluster launch like the DS, 3DS, and even the Xbox 360 with the whole Red Ring of Death. Even the PS3 managed to turn around somewhat during its final years. It's just extremely hard since the gaming market tend to latch on to one system as the dominated, while every else get scraps. This time period is one of the few exceptions with the Switch and the PS4 both doing extremely well and breaking records. The only thing close was the SNES and Genesis in the US.
I think that Nintendo's portables and the 360 were allowed a mulligan mainly because of the lack of competition.
 

HeroR

Member
Dec 10, 2017
6,199
I think that Nintendo's portables and the 360 were allowed a mulligan mainly because of the lack of competition.
The DS was up against the PSP, which had a very good launch and was even ahead of the DS in the US. Then the DS Lite happened. That and the 360 was against the Wii who washed it outside of the US.
 

JoeNut

Member
Oct 27, 2017
1,377
UK
Ps5 exclusive games will be my reason to buy at launch. In the grand scheme of things it's an extra 50 quid or so, that's barely a game
 

RestEerie

Member
Aug 20, 2018
8,944
Nvidia just reached its historical high in share prices so i just earned my budget for my next console (and then some) so i say....

Bring on the $1000 ps5!!! Im ready! ;P
 
May 1, 2018
142
Services are a much larger part of the profit than 7 years ago, especially for Playstation. I think it's still possible we see a $399 PS5 so they can transition users from PS4 to PS5 as quickly as possible. I think they would be willing to take a loss like that since they'll end up making a larger profit from online subs and the like, especially if they bundle PS+ and Now together.
 

DrDeckard

Member
Oct 25, 2017
5,317
UK
Services are a much larger part of the profit than 7 years ago, especially for Playstation. I think it's still possible we see a $399 PS5 so they can transition users from PS4 to PS5 as quickly as possible. I think they would be willing to take a loss like that since they'll end up making a larger profit from online subs and the like, especially if they bundle PS+ and Now together.

This is a great point...but what if they literally cant build them. Theres a world wide shortage on nand and dram with prices expected to raise by upto 40 percent through the remainder of 2020.

Sony and ms wont have a problem selling 399 next gen boxes but they may not be able to build enough at the rate that's required. Plus we dont know what's happening with Corona.