Sony is selling its latest console a meager $18 markup.
A hardware teardown by IHS revealed that it costs Sony $381 to manufacture the PlayStation 4.
According to IHS the bill of materials for the console came in at $372, with an additional $9 factored in for the cost of assembly. The PlayStation 4’s APU from AMD, which combines a Jaguar APU and Radeon GPU, costs Sony $100 (it isn’t clear what AMD’s markup on the part is). The console uses GDRAM DDR5 memory, which has a higher bandwidth than the DDR3 memory used in the Xbox One. However, GDRAM also costs more, and as such the memory unit on the PS4 costs $88.
IHS analysts say the processor in the PS4 was one of the largest in terms of surface area.
“This processor is a monster, with the surface area of the chip amounting to about 350 square millimeters. That is three times larger than any other chip manufactured using equivalent-process technology that has been examined by the IHS Teardown Analysis service,” IHS wrote in its report. “Despite the remarkable silicon acreage of this device, it comes at a price point attractive to mainstream consumers while delivering a very high level of performance. Future versions, manufactured with even more advanced semiconductor processing technology, will further enhance both cost and performance.”
In addition, the 500 GB Seagate hard drive costs $37, with the optical drive coming in at $28. Then there is the controller, which features Qualcomm’s Bluetooth radios, as well as an audio unit from Wolfson Microelectroncs and a motion sensor from Bosch. The controller costs $18 to build. Other wireless radios and integrated circuits amounted to the final $371 bill of materials.
To put these numbers into context, the 64 GB iPhone 5S that sells for $849 unlocked costs Apple $218 to build. A similar situation is seen with the iPad Air, which costs $274 – $361 to manufacture, but sells for $499 – $929. Other manufacturers also enjoy such high markups, with Samsung making a hefty $353 profit on a Galaxy S4.
Sony is selling the PlayStation 4 for $399, which nets it a profit of just $18. However, this is a much better situation than the one it was in 2006 when it launched the PlayStation 3. The PS3 was sold for $599, but cost Sony $805 to build. Manufacturing costs came down by late 2009, but Sony was still making a loss on each PS3 console sold. The consoles were selling for $299, while it cost Sony $336 to manufacture. Unlike smartphones, Sony accepted the lack of margins as a way to get games and other content to consumers.
With the PS4, Sony was able to trim costs, and sell the console at a marginal profit. So far, the numbers have been great, with over 1 million PS4 consoles sold during the first day. With the Xbox One launching in the U.S. next week, who knows if Sony will be able to continue the momentum.
Image Credit: IHS