February 23, 2006 4:00 AM PST

PlayStation 3 component prices: Why so high?

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Consumers who buy the PlayStation 3 will certainly get high-priced components in that new game console whenever it hits store shelves.

The big question will be how much of a financial loss Sony will have to swallow on each box in order to get consumers to buy them.

The estimated total bill of materials for Sony's next-generation game console will be between $725 and $905, according to various estimates. In comparison, the Xbox 360 from Microsoft comes with a component bill between $501 and $525.

Though Sony hasn't disclosed the price of the PS3, analysts figure it will have to be in the ballpark of $299 to $399--the price for the two versions of the Xbox 360. PS3 pricing speculation has heated up in recent days, along with rumors that the long-awaited game console could be delayed for up to a year.

component prices

The pricing disparity between the components for the two consoles comes largely because the Sony box will contain a Blu-ray drive, which supports the new high-definition Blu-ray DVD format. That could cost $200 to $300 or more per console. The processor in the PS3 also will likely cost more.

The unusual nature of the new console's component menu makes it difficult to pinpoint the cost estimate. The PS3 will be one of the few machines on the market with XDR memory, based on designs from Rambus.

Some analysts have suffered addition problems, too. Merrill Lynch wrote in a widely publicized research note that the component bill would total $900, not including a detachable drive, but Merrill later told CNET News.com that it meant to say $800.

Nonetheless, the cost of the rest of the components is roughly equal for both the Sony and Microsoft consoles, according to various analyst estimates.

The materials price estimates do not include marketing, software development, advertising or other costs, which will push Sony's total cost per console even higher. A Sony representative said the company would not comment on pricing.

A mismatch between the retail price and the cost of materials for a game console isn't unusual, because console manufacturers expect to make up the difference by selling games to run on the consoles. That's what Microsoft did with the Xbox 360.

The cost of making game consoles also drops rapidly over time because manufacturers don't usually upgrade the configurations year after year, while the cost of the components they're using drop. Merrill Lynch, in fact, estimates that the component bill will drop to $320 in three years, not including the detachable drive.

Ken Kutaragi, who heads up Sony Computer Entertainment, is counting on it. In 1999, the processor and the graphics chip inside the PS2 took up 239 and 279 square millimeters in surface area, respectively, which made them relatively large (and hence relatively expensive) chips, he noted in a speech in February in San Francisco. By 2004, the two chips were condensed into one that took up only 87 square millimeters, almost one sixth the size.

Here's how the components stack up.

Processor: The PS3 will be a showcase for the Cell processor from the SIT powers (Sony, IBM, Toshiba). The cell consists of a PowerPC core with eight signal processing cores. While the large number of cores help run multimedia applications, they also make for one large chip. Cell will take up 221 square millimeters of space, larger than the 168 square millimeters of the Xbox 360 processor. Larger chips are typically more expensive to make.

A greater percentage of the real estate on the Xbox 360 chip, also from IBM, is given up to cache memory. Cache is typically cheaper to manufacture than logic transistors, which own more of the real estate on Cell. As a result, Sony faces two disadvantages in terms of cost.

Kevin Krewell, editor in chief of the Microprocessor Forum, estimates the chip will cost between $150 and $170 at launch. Merrill Lynch puts the cost at $230, dropping to an estimated $60 in three years. In comparison, iSuppli estimates the cost of the Xbox 360 chip at $106.

CONTINUED: Graphics chip, memory and more…
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Massive typo?
What exactly is this statement supposed to say and mean??

"The Xbox has a standard DVD drive, with an HD-DVD drive."
Posted by guinnessguy (8 comments )
Reply Link Flag
I think they probably meant to say
that the system comes with a standard DVD drive with an HD-DVD option coming later.
Posted by Chevaliermusic (72 comments )
Link Flag
The pricing on consoles is a shoot in the leg
The competitive market of video game consoles created an absurd situation where the console price is subsidised by games. The end user, instead of enjoying cheap consule gets pricy games.

As a user I prefer to pay $500 for a consule and get games for $20 rather than $400 on a consule and $30 per game. (Assuming that the breakeven point is 10 games). The simple reason is that cheaper games enhance the consule value way beyond a cheaper purchase of the consule itself. The games are the point of enjoyment, not the console.

Nir Ben-Dor
I write for <a href="http://www.comagz.com/webmagazine/">Linkadelic Magazine</a>, you can too.
Posted by nbdr (7 comments )
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Whatever the market will bear
I suspect you're missing the point - the reason the games are expensive is not specifically because of the hardware subsidies, but simply because people will pay that for games.

The market for a console at release is typically quite small anyway (as you say, people want games - and they don't have a wide choice when the hardware has just come out) - so charging the full price for the unit would just make it even smaller.
Posted by trimesh (3 comments )
Link Flag
Let's be realistic about the pricing
No way in hell is Sony paying 200 bucks for Bluray drives. They invented the technology. Why would they be paying 200 bucks on something like that? PErhaps 100 is more realistic.

The Cell Processor as well should be no more than 150, bluetooth probably costs them about 5 bucks, and HD I/O probably costs them around 20-30.

All in all I'm willing to bet they pay no more than 5-600 dollars per each console.
Posted by (461 comments )
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Ohh thats right
I forgot you know everything... especially more than people who do this for a living, please sir go on... Oh and FYI Sony did not "create" Blu-Ray they simply support Blu-Ray. No one wants to hear you talk so don't post something unless you know what your talking about.
Posted by mrpeabody3119 (101 comments )
Link Flag
Let's be realistic
Sony does want to make a profit. It can't afford to sell the Blueray at cost. Sony does not have the money set aside that Microsoft has. And what about the software, Microsoft already has that from their core business, Sony will have either buy something(more money) or develope something on their own(more money). And Sony is not the healthest company right now. Remember when Stringer took over,they immediately started trying to figure out how to cut cost. That's why they brought him in.
Posted by DCBRONCO (42 comments )
Link Flag
You're right, not $200
It'll actually be somewhere BETWEEN $200 and $300.

You can see this is realistic because while Sony would *LOVE* to sell the first Blu-Ray players for $500 like HD-DVD players, they CAN'T. So, they will sell them later this year at $1,200-$2,000, mainly because the drive itself is so expensive to manufacture.

No, Sony is not charging this because they "can", they are at a serious price disadvantage because they are forced to be.

Study up a bit on Blu-Ray manufacturing and costs, you'll be surprised.
Posted by KTLA_knew (385 comments )
Link Flag
My friend, it's called economic
In the marketplace things are rarely priced at the cost of manufacture. Sony has to shell out a lot for BD drives because there aren't many producers. The tight supply give the sellers huge pricing power. And they will naturally use it, to recoup the money they invested in adopting the technology.

I still remember how 15 or so years ago where CD-ROM drives were going for $500+.
Posted by Chung Leong (111 comments )
Link Flag
does everyone love to throw out numbers and call them facts? Each and every post here has pretty much thrown out a different number. As I see none of you and no one else has even the slightest idea as to how much any of this will cost. The only people that do are those that work for Sony and handle this stuff.

I know everyone has their opinion, but you are all bashing others for having their own opinion. You should be ashamed for believing every bit of info that supports your theory and tossing anything that doesn't out the window.

I'm sure there will be plenty that disagree with me, but this is my opinion and it is just as valid as anyone elses at this point.

Obviously, I'm getting sick and tired of all the BSing and rumors surrounding the PS3. Guess I should just start avoiding tech and game sites like the plague.
Posted by Hobo453567 (26 comments )
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Just shows...
how upset I am. I did the same thing I accused everyone else of doing.

The point is that all these numbers people keep throwing around are from analysts. Analysts' predictions vary so much they should never be trusted, but most people seem to. I could probably find several different analyst opinion as to how much the PS3 will cost. Heck they showed multiple ones here.

I just don't like how people here are basically telling others they are stupid for not believing the same analyst they do.
Posted by Hobo453567 (26 comments )
Link Flag
One things for sure...
When Sony finally does release PS3 to the masses it will cost more than an Xbox360. By how much? Only Ken knows. I think there's enough data out there that this will be so. But nevermind the cost of the console, I'm more worried about how much more money we'll have to shell out for software.
Posted by Laserdisc (79 comments )
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Missing Comment?
Question whatever the pricing just where is the incentive to buy one?

Why bother, when what's hovering on the horizon, in cutting edge technology, for the plain vanilla PC's, will make this unit obsolete junk!

Many other key factors, that will influence the price of the unit and it's copy protected games have been casually overlooked!

Me thinks, given the fiscal information supplied by SONY Central annual shareholder reports, audited tax filings, the major use of rebrands to bolster ailing sales, and large sub units like SONY BMG the rootkit king, continuing to lose money from it's capital base , the kitty is very shallow or empty for any type of subsidy!

Interestingly, no one has asked why the major japanese console games makers, have all but abandoned development and/or placed on the backburner killer new advanced games for this unit! Oops!

Oh well, it all boils down to choices, beside which, at least with clone pc's you can play the old fun retro games, with this unit you can't!

Choices, don't you love them!
Posted by heystoopid (691 comments )
Reply Link Flag
knock out punches
I agree with you on all points. However, I can't see a knock out punch. Recently, I researched the invasion of China by Japan, which I thought exaggerated. Let's just say that 120 million people and Spidey are going to keep Sony going a long time yet. Also, the news media, when bored with PS3 and Xbox, will go back to selling papers against Scientific Atlantic, Directv, Echo, Amiga et al. :) :) :)
Posted by FisherKingKQJ (59 comments )
Link Flag
Well it's like this
Razors and razor blades. They don't make any money off of the
razor handles, heck they are usually sold at a loss. But they sell
their refill blades real expensive to make up for the loss. They
even make more on the shaving supplies that go with it.

So what am I trying to say?

They are going to sell at a loss to gain market share. Then they
are going to make money off of all the license fees (Games, Blu-
Ray, Cell, etc) and all the accessories that go with the system.
Even if it isn't their accessories, most of those have to be
licensed to be made for the console.
Plus all of the first party games under SCEI.
Posted by MidniteRaider (94 comments )
Reply Link Flag
New PS3 prices includes the new Sony HDR technology?
HDR is the Hidden Destructive Robot technology that will apparently be built into all new PS3 machines. At night, these new boxes will sprout legs and secretly scour your home for any illegitimately used Sony products.

High on the search and destroy list for the HDR will be any illegally downloaded music and software that can be found on your home computers and MP3 players.

In recent test however, the HDR was responsible for the death of one or more family members in 3 percent of the beta test sites. Sony has refused to release the PS3/HDR device until it has casualties in less than 2 percent of test homes.

Estimated HDR PS3 released date: October 2006.
Posted by PiratePete (17 comments )
Reply Link Flag
that was funny. I also have my opinion about the pricing of the PS3. It will cost more than the 360. There is no doubt about that. If it does manage to come in at the same price, Sony will be taking a huge per unit hit. It is impossible for the PS3 to have a manufacturing cost equal to or below the 360. There is simply too much new stuff in there. As all techies know new stuff costs $$$$$$$$$. If Sony does take until 2007 to get the PS3 in the US (as has been recently rumored) the 360 will probably drop in price by then. If not on the same day as the PS3 ships.

For the record I own a Xbox, PS2 and a 360. I like them all for different reasons. Sometimes it feels like Sony is shooting themselves in the foot with this one. They are simply trying to do too much and in the end it will be another NeoGeo. An excellent ahead of it's time system but too expensive for the masses.
Posted by Rupan3 (5 comments )
Link Flag
Sony needs to pay for ROOTKIT development!
Posted by Stan Johnson (322 comments )
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Sony prices are so high because analyst's dont have a clue.
Here are the component prices in the diagram/pic

PS3 $150-$230
360 $106

PS3 $200-$300
360 $20

PS3 $140
360 $140

PS3 $65
360 $65

PS3 $40 optional
360 $40

PS3 $130
360 $130

Now let me just say, most of those components SONY MAKE THEMSELVES plus some X360 calculations are way off too. Lets have a look at the prices and see what is wrong here.

PS3 Cell processor:

Supposed to be $150-$230 to make I say $150 MAX and that is going on IBM yields per wafer which is 65 good Cell chips per wafer with each wafer costing $9,000-$10,000 but wait... yields must be getting really good just lately, well actually before they re-newed their contract for a further 5yrs, because they are already discussing 65nm chips and even 32nm chips, making cell much more cheaper to manufacture and also meaning, they must be getting more chips per wafer than 65. If yields were bad, they wouldn't even start to think about shrinking the chip.

X360 Processor:
This processor will be fabricated by IBM, it takes up more space than a Cell chip, so will cost more than Cell to make, due to more silicon being used. M$ have to pay IBM workers to make the chips and their materials that go into making them, outside source workers cost more than people working for your own company, basically IBM can charge what they want and you can bet wages will be higher than Sony's in-house made chip.

BTW the processor costs will reflect in the same way as the GPU costs, Sony are manufacturing their own GPU and paying royalties to nVidia. M$ have to pay ATI workers to make their GPU and pay for materials, so again, more expense for M$.

PS3 $200-$300:
This will more than likely be made by Sony, and the price range seems fine to me here, I'd say nearer to $200 than $300 though.

360 $20:
Did they forget to add the optional HD-DVD drive cost? or the blu-ray drive cost? they sure as hell didn't forget the Hard drive cost of the PS3 (which I will explain later) add another $300-$400 and that is being generous, considering M$ wont be making the drives.

XDR RAM is more expensive than any other ram 256MB + 256MB of GDDR3 RAM will cost about $100

The RAM sounds about right here $65

Hard drive:
$40 is optional, now I'm not sure what size drive you will get for this, but if this was the manufacture cost of a PS2's Hard drive, then you can expect a larger drive than 40gig for PS3 for this manufacture cost, because a 40gig HDD for PS2 with a FULL online game installed + demo's cost $100 which is a while ago now.

$40 manufacture cost for a 20gig HDD??? the drive wouldn't even cost that to the consumer to buy, never mind manufacture it, that price is seriously wrong. It's not even a great drive according to a seagate rep at CES, who called it "cheap" "Junk".

Other Doodads
Sony produce most of their own connection types, Memory Stick for instance, this price is way too high, I say about $50-$75, they also make their own components for their boards, don't forget, they are a consumer electronics company and a long standing one too, with many inventions under their hats.

$130 sounds about right, considering they don't have a hand in electronics, they are mainly a software company.

PS3's processor costs less in materials and is cheaper to make, with it being made in-house.

PS3's disc drive may add price to the system, but if you consider X360's option of an add-on drive, then the price is worth it. One of the next gen drives will be needed for HD films and it looks like Blu-ray is going to win.

The graphics chip: Again, refer to the processor, PS3 manufacture prices will be less.

PS3 memory will cost slightly more here with it using the faster more expensive XDR RAM, the extra price here though is well worth it.

Sony's HDD will be worth the money, analyst's predicting $40 though seems odd, when there's been hints at different size HDD's for PS3, they will come pre-installed with some kind of Linux operating system. M$ HDD doesn't sound too good to me, a 20gig HDD does NOT cost $100 to the consumer, that is just ridiculous.

The other bits and pieces are cheaper for Sony to put in PS3, even though PS3 has more input/outputs.

PS3 looks to me like the best console for your money, simply because Sony can make the console cheaper, with most of the components made in-house. Yes the Cell fab plant will pay for itself in the end, they don't plan to use Cell chips in just the PS3, they have many other consumer devices in mind for the chip and will more than likely, all communicate in some way with each other.

Final manufacturing cost's?
I'll leave it for you to work out ;)
Posted by No-namer (2 comments )
Reply Link Flag
The HDD's I mentioned
Here is that PS2 hard drive I was talking about, 40gig with Final Fantacy XI $99.82

<a class="jive-link-external" href="http://www.walmart.com/catalog/product.do?product_id=2432441" target="_newWindow">http://www.walmart.com/catalog/product.do?product_id=2432441</a>

M$ 20gig HDD $99.92

<a class="jive-link-external" href="http://www.walmart.com/catalog/product.do?product_id=4196270" target="_newWindow">http://www.walmart.com/catalog/product.do?product_id=4196270</a>
Posted by No-namer (2 comments )
Link Flag
just another fanboy...
who thinks he can predict the cost.... Just wait 4 months or so and see how much it cost in Japan. When it comes out, come back to this thread and see how close you really were.
Posted by mrpeabody3119 (101 comments )
Link Flag
Get a Grip Folks
I honestly could care less what it costs anybody to make the consoles. The Xbox 360 I bought was $400 with a decent number of accessories and I'm pretty happy with what I got for that price. The PS3 I will buy will be in the $400 ~ $500 range and hopefully I'll be happy with that too. Oh, and mark my words now; the Revolution will cost $150 with games at no more than $40 each and will be available sooner rather than later.

I see many posts here underestimating, by far, the manufacturing costs to Sony for the Blu-Ray drive and Cell processer. THe article is most likely correct in it's pricing. Do not forget that these are NEW TECHNOLOGIES. It doesn't matter who makes them, they are still going to be very costly to manufacture at first. Why do you think the Blu-Ray drive will likely be 1x rather than 2x? Because the cost difference is that great...at first anyway.
Posted by PhillyBoy919 (126 comments )
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Posted by flaming_baby (1 comment )
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