PS3 manufacturing costs down around 70%

CFO Nobuyuki Oneda tells analysts Sony has cut console-making expenses by over two-thirds since 2006; unofficial iSuppli estimates point to $252 production price, resparking PS3 Slim speculation.

775 Comments

Yesterday, Sony issued a dispiriting April-June earnings report, which showed quarterly PlayStation 3 sales fell from 1.6 million to 1.1 million. The PS3's slowdown is ironic, as it appears to have come just as Sony got its console manufacturing house in order. In an English-language conference call following the earnings report, Sony CFO Nobuyuki Oneda was asked by an analyst to "give a sense of how much you've reduced the [PS3] cost to build since inception."

Sony CFO Nobuyuki Oneda
Sony CFO Nobuyuki Oneda

Oneda's response was vague--at first. "The cost reductions since we introduced the PS3 are very substantial and on schedule," explained the executive. "We don't disclose how much of the PS3 cost reduction was specifically achieved during the past two years. But that is on schedule."

Then, Oneda decided to throw a number out. "About 70 percent, roughly speaking," he said.

As its CFO indicated, Sony does not give out an exact production cost for the PS3. However, a hardware research firm has offered unofficial estimates on a regular basis for several years. Last December, iSuppli estimated that Sony spent $448.73 in parts and labor to make each $399 80GB PlayStation 3. The number was down from an estimated production cost of the now-discontinued 60GB PS3 model, which had backwards compatibility with PS2 games. iSuppli estimated that model cost $690.23 to make in mid-2007, when it was priced at $499, and $840.35 to make at its November 2006 launch, when it cost $599.

If Oneda's 70 percent figure is applied to iSuppli's $840.35-per unit launch-cost estimate for the PS3 (which has not been confirmed by Sony), the savings are a substantial $588.25 per unit. By that calculus, Sony would spend $252.10 to make each new PS3, the base model of which sells for $399. Theoretically, that would generate a $146.90 profit per console, not including packaging, transportation, and other costs.

While the combination of iSuppli estimates and Oneda's comments are interesting, they are by no means official. Indeed, earlier this month, Sony CEO Sir Howard Stringer appeared to scoff at the idea that PS3 hardware was currently profitable. In response to Activision CEO Bobby Kotick's call for a price cut for the console, the Wales-born Stringer quipped, "I lose money on every PlayStation I make--how's that for logic?" Furthermore, the newly formed division that contains Sony Computer Entertainment lost ¥39.5 billion ($415.6 million) last quarter--more than Sony's overall loss of ¥37.1 billion ($390.3 million)

The photo that launched 1,000 PS3 Slim rumors.
The photo that launched 1,000 PS3 Slim rumors.

However, there's a good chance that Oneda was referring to PS3s Sony is making right now, not last quarter. And one possible reason for the "substantial" PS3 production savings could be a reduction in materials resulting from a shrinking of the console's form factor--which has already been widely rumored. Sparked by an apparent photo leak in May, the past few months have seen widespread, repeated speculation about a 120GB "PS3 Slim," similar to the slimline PlayStation 2 introduced in late 2004. Though Sony offered no comment on the photos, a mysterious Taiwanese law firm sent cease-and-desist letters to several online news outlets that posted them.

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cloud121

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@ izmickey i agree with u because it may be expensive but its so much worth it, no offense to 360 owners but i been hearing 36o always having issues its like buying a bmw and ford. ford=360 and honda=ps3. i rather spend my money that has great quality and get a bang for my buck. i have had my ps3 60 gb since it first came out like 5 or 6 months after it first relased when it was 500 or 400 and i have never ever had issues with it . hopefully sony gets in line and has a definite product im kinda mad the slim ps3 came out becuase the ps2 slim didnt come out till like 7 or 6 yrs later. i mean im good with my 60 gb since it can play ps1 games and i dont wanna buy some games from psn.

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GAMERALL

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AXE THE PRICE!

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Cetanu07

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i still love my original 60gb ps3 and always will. i LOVE playing my LoK games on it

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mellow09

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I really don't believe that but if it is true then I expect non-slim models to drop about $50-100 (more likely fifty), and probably lose another feature. The slim will come out at the cost of $400-450. I say the base models will lose another feature because Sony will want people to buy up the more expensive console.

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jazilla

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does anyone here want to open a business and sell their products for 5-10% LESS than what they cost you to manufacture? I didn't think so. I am so glad I am not in the business of making game consoles. It has to be so stressful.

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SolidSnakeUS42

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Maybe since they announced this they may have a set time of a price drop by Labor Day or have it on Labor Day?

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gameweasl

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Well I hope this helps drop the price...

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izmickey

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@atopp399 What are you talking about? Its like making a bmw cost the same price as a mercedes. Why would something that offers more and is more reliable be the same price as something that offers less and is less reliable?? Stop complaining about it being too expensive, if you work, just save up an extra few bucks. People like you want the ps3 cheap because you want it now and dont want to save a little and get it later.

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JVelvet

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I saw this and was hoping for a price cut announcement. I needs me some PS3 goodness!! A price cut would mean more people buying PS3s and that would mean more third party support (which is it just me or is it getting seriously low?). I hope PS3 can come out of this slump. But dammit even I am starting to get skeptical. :(

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samissleman17

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wait, sony cut production costs by skimping off some key features! No price cut seems unfair. I'd get old ps3 used.

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TSNAKE617

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It's time to knock a few dollars off and start overtaking the Xbox, Sony. :D

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darkxxchris

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can someone tell me if theres going to be a price cut soon

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tremor33

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Nice. good news for a price cut / ps3 slim potential. Good to have an article to shut up the speculation from certain "other" console supporters.

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buffdaddy69

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"ftjx Posted Jul 31, 2009 11:17 am PT ok, so the harddrives keeps increasing in size -for downloadable games and movies I suppose. Why do you need bluray then?" Well, Xbox has downloadable movies, and you have the option of Standard or Hidef, Sony will probably do the same thing, but instead give you the choice of standard or Blu-Ray. The PS3 does have Blu Ray technology, so im pretty sure they can put Blu-Ray movies in Downloadable format

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athenian29

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Slow down, everybody. Let's not forget how many parts they had to cut to reduce costs like this: - SD Card Slot - Multiple USB Ports - Back-compatability And those are just the ones the everyday consumer would notice. They may have cut costs, but the very first 60GB model is still the best, most fully-featured, and most well-rounded PS3 model they ever made. Buy them used before they're all gone. Hurry!

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ftjx

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ok, so the harddrives keeps increasing in size -for downloadable games and movies I suppose. Why do you need bluray then?

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atopp399

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I don't believe for one second they are making over $100 on each PS3. They would reduce the price for sure if that was the case. Most money on consoles is made through the games. Why wouldn't they reduce the cost to be in line with the Xbox. They would still make a profit on the system and they could easily lure most people away from the Xbox which means more people buying the games which is where the real money is. It just doesn't make sense at all.

He fumbled around the issue... He probably included layoffs in the price reduction percentage...

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Dark_SoulWraith

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You need competition to survive. Hopefully Sony can take a stronger position with the PS3 now. I love me Xbox360 too guys, but you can't expect it to simply fight over revenue with just the Wii :P

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MetalCore84

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I hope it can get back on its feet, brotherhood to all walks of gaming!

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StephenBassford

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Nice to know that sony can actually make money now. Maybe the console will see it's price drop.

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thekey

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@scarface_dm Doomed, to success.

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pvtvaladez

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Price cut?

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thekey

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Just in time for a price cut. Sony.

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