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.

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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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zakkess

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the economies getting better so ps3 is gonna get better once they do a price drop and maybe a slimline..time to take the thrown again king sony :)

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corkyhookahking

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well i love my ps3 it's free to play online and it's getting some really good games now and i firmly believe that if sony dropped the price it would destroy the 360 and the wii

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ShadowLink102

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I don't care how cheap the PS3 gets, I can't afford both and playing Live with all my xbox-owning friends trumps any hardware advantages Sony has.

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pop4dmc4

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If PS3 price become 299$, it would boost the sales and take out the 360 in no time.

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Xx619MysterioxX

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Lol, Facepalm on the Fan boy fights. PS3 is Superior to 360 in many ways. Lets just Hope that Sony gets Better and Better when the Economy is so Crap right now.

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i_PWN_fanboys

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I cant believe the amount of people on gamespot that cant speak proper english. Ever read a book?

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acsam12304

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right after i got my PS3 they lower the price a few months after dang it!. doesn't matter i wish i have the very 1st PS3s that has the PS2 play back.

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Raykuza

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@RunawaySheep I got 68% from an article in Gamepro magazine. I believe it was an issue from either last year or early this year. I'm not too sure. These weren't the consoles they were releasing. They were the ones they were testing just before launch. And 35% is too high, too. That's more than 1 in every 3 consoles. Think about that. A third of the consoles failing? You mean I have a one in three chance of buying a $300 doorstop? Ridiculous. I have no problem with seeking value and wanting to pay less for products, but I refuse to spend my hard-earned money on something that's broken. Not to mention that I don't trust a company that will smile and sell me a piece of crap that they KNOW is a piece of crap. As a consumer, I am insulted.

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diamond2d

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Even though RRoD is a major problem with 360 its obviously is'.t a big one concidering 360 is domination PS3, its not that 360 is better in the hardware department (fact) but its the software! Why do people buy a games console? PURLEY FOR THE GAMES! 360 foreverrrrrrrr, PS3 suksssss

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bsnimunf

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Its not the price of the PS3 considering what you get if you dont own any other console. Its the price for what you get if you already own an 360. Most games are multiplatform, if someone owns a 360 the few exclusive games on the PS3 arent worth another £300 plus the cost of each game. When the PS3 was released too much of the market already owned a 360. If they can reduce the price to about £200 or $250 alot of xbox owners will be willing to fork up the cash.

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auntbessie

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I like my PS3, great machine for the money, built in wireless is hopeless though, if there's a fart in the air between the console and the router it'll drop too low to get a decent connection - always wondered if they've improved things since the first batch.

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iversonisdabest

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i agree with fireboy78

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Fireboy78

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Why there's so many people complain about Playstation 3's price?? I think it's reasonable price because of blu-ray inside, built-in wireless, six-axis controller, and other many very good features that's which DESTROYED Xbox 360's features that's which is sux and rrod and other system failure. What's if your system is finally failed such as rrod or other problem that on Xbox 360, and your warranty is expired that's which is forced you to pay other Xbox 360 would equal as Ps3's price. It's worth? NO! Ps3 is rarely to break, while Xbox 360 is very highly break chance than ps3 do. My friend have broke xbox 360...pathetic!

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ZeerusX

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Yeah, yeah, yeah. "Well Microsoft does all the repairs for free" They shouldn't have to. They shouldn't have to be fixing 60% of the consoles they sell. If you can't figure out that that's costing Microsoft money, your stupid.

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ZeerusX

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Yeah, I know people who have had to purchase 3 360's, simply because they keep breaking. And yes, they did properly ventilate them. On the other hand, I've had to buy 1 PS3, and I doubt I'll ever have to buy another in the life of the console.

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blazey09

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i think the ps3 is at a good price point anyway.....i mean the microsoft took stuff out to make the price cheaper which is the harddrive and thats the most important thing if you are a gamer with all of dlc there is.

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Tombackman_5

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Lets see a price drop. No whammy!

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BVCX

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[This message was deleted at the request of the original poster]

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BVCX

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@fark And how many 360 owners bought their 360 again? I know I did for my launch.

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RunawaySheep

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@cheesytaco69 @Johnnyb437 And you know what? Everyone I know has stories of PS1 abuse, but I don't know anyone who ever needed a replacement. Nowadays, I freak out when anyone even approaches my 360, lol. These fancy high-tech consoles we have now are a bit too sensitive. I should be free to kick my 360 whenever I wanna!! .....Or at least not have to worry about it so much. Oops, off topic. Anyway, I'm pretty confident that we'll see a price drop this year from Sony. If not, then Sony must like the number 3

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wateverboy

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wow! some of you want it for 200? get real, even the 360 dont offer that with what the ps3 got. Go check out the expensive ipod.

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LorDarko

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For that PS3 Sucks. Thanks God i have a Xbox 360.

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jah1415

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fark those are facts sony isn't losing money on just console sales they make other things you know. Your post sounds biased

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_fark_

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All these comments on the PS3 improving sales and being "neck to neck" with the XBOX360. Quite funny when I see the articles about Sony making a $390 million loss due to the poor console sales, namely the PS3 dropping by 30% and the PSP by nearly 70%. Articles on the right under featured stories -----------------> Im just wondering how anyone can come out with such dribble when there are FACTS that say the complete opposite?

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Johnnyb437

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@cheesytaco69 My dog knocked over my little entertainment center in my room that my ps1 was on and the entertainment center landed straight on top of it and it still worked. I was amazed.

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cheesytaco69

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@ RunawaySheep (cool name) I dropped my PS1 down the stairs accidentally and it still worked! Also tripped over the controller cords and ripped it off the shelf slamming it on the hardwood floor, still worked! I wish they still made consoles as sturdy as they did then.

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RunawaySheep

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@ico92 You're right, the bottom line is that failure rates on the 360 have been much too high. But all the haters always forget to mention that Microsoft is actually biting the bullet on that one by extending the warranty to accommodate any RROD problems for free. PS2, hahaha. Mine would still work if my nephew hadn't filled it with coins. Hell, my PS1 still works. Those things were surprisingly sturdy. Ah, I miss those days. I must have kicked my PS1 and spilled coke all over my controllers a dozen times, and they still work, hahaha

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ico92

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@runawaysheep i did hear a rumor that RROD at one point 68% but still its not saying much because 35% is extremley high not just for a console but for an electronic

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Johnnyb437

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Wow. What is with all of the RROD nonsense? Microsoft does repair any console that experiences a malfunction for free. You all need to consider also that the 360 was the first console launched in this gen, so of course it will have its problems. One of the reasons why Sony delayed its launch was so it could make sure that it fixed any problems with its console before launch day. I've had my 360 since launch day and have had no problems thanks to me actually giving a crap about my console. And just because I own a 360 then that makes me a fanboy? I don't think so. So then just because I drive a Nissan that makes me a Nissan fanboy as well? Do you all see how illogical that sounds? It doesn't make any sense. I bought my 360 because of the games. I could care less about the brand. The 360 has the best game library out there right now. It's also cheap. These are the reasons why people are buying them.

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kuvze

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comon people..don u wanna really even say rrod here??get real..we all knw whose on the verge of dying..

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ico92

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@runawaysheep i heard rumors that it did at one point reach to 68% but still its not saying much because 35% is still ridiculously high for a console makes the ps2 failure rate look like the nes(mine still works to this day)

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RunawaySheep

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@Raykuza 68 percent of the first generation 360's had RROD? Where did you get that figure from? The highest percentage I've seen mentioned in any article is 35 And why are so many of you acting like it's so stupid to want to pay less for something? Some of us work, go to school, have social lives, pay bills, and we're constantly trying to make ends meet while still trying to keep up with our fav hobby. This console has been around for quite a while now, and with Sony constantly losing ground to Microsoftt and Nintendo, a price drop is really crucial right now. Last but not least, The PS3 is NOT a Ferrari. It has only a slight technological edge on The 360. A high-end PC would be the Ferrari in this analogy.

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jah1415

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so many xbox fanboys here thinkin the ps3 is done. well it's not so far in sales it's been keeping up with the 360. the 360 dominates in North American everywhere else the ps3 and the 360 are neck and neck. Low prduction cost means they'll actually get to make money offf the ps3

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melty3219

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sony is teh suxz0rs

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Raykuza

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@24k_Solid_Gold So just because your system hasn't RRoD'd yet, the error is a rare occurrence? Try telling that to the people that have gone through multiple 360s due to this very malfunction. Remember that we're talking about the console that had a 68% failure rate fresh off the conveyor belt in '05. Since then they have had to extend the warranty to accommodate the broken machines and have endured multiple lawsuits. This problem is no rare fluke and the only reason I don't have a 360 is that I refuse to pay a single cent on a product that is practically already broken.

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Vasot

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Maybe they should drop PS3 and start making the PS4... By the way i have my X360 for almost 2 years and i never had a problem with it...no rrod and no cd scratching

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24k_Solid_Gold

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@Deathmorbarez "Obviously you deserve a console that sucks your money right out of your wallet and then brings up the RRoD or the CD-scratching." The RRoD is an exaggerated malfunction that only occurs to the odd 360. It's the same things as any random fluke that happens very rarely in terms of percentage. Once enough people get that unfortunate malfunction, they say that everyone gets it, there's no way to avoid it, the 360 is a terrible console, etc. The RRoD is happening less and less as Microsoft fixes up a few problems. I've had a 360 for two years now, and I've never had this infamous "Red Ring of Death." As for disc scratching, this is only the fault of the foolish and occasional user who doesn't understand how their hardware functions. Of course the disc with be damaged if you pick it up and move it around when it's supposed to be stationary. If you could take the hard drive out of your computer while you had just recently used it, and shook it around, the discs inside it would get damaged as well. It's not Microsoft's fault, nor is it their console's manufacturer's fault. It is simply how the hardware functions, and anyone stupid enough to be using a piece of hardware they don't understand should not be in possession of it.

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24k_Solid_Gold

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MasteRich

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Good because now you have no reason not to do a pricecut!

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Deathmobarez

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@hornetime Agreed. People are just foolish.

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_fark_

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hornetine

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Just someone here already stated, wanting the ps3 to be priced the same as the 360 is wishful thinking at best. Why should a system that cost more and to put it simple, better made, cost the same as a half-assed cheapo? Take a logic class for once and all will be well. P.S.- Call me up the day you get a Ferrari for the price of a corvette

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PvtRyan3

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Deathmobarez The sales of the Sony PS3 are way down and the majority of the reason is due to the selling price. Sony is going to have to be more competitive. These are the basic facts.

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Deathmobarez

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The greed of mankind still grows. Today's gaming is always the best if it's CHEAP according to a lot of people. Even though the 360 has more errors and Microsoft is sucking all your money because you wanna play on Xbox Live, even though you're already payin for the internet. And of course there's the Wii which sells good, even though 70% of the games are crappy games that should be thrown away as soon as you see them. Now this greed is almost destroying Sony. A price reduction is good probably, PS3 will obviously dominate the industry, but it's sad hat Sony lost a lot of money because everybody didn't wanna pay just a little bit more even though the PS3 obviously has the greatest qualities. Greed destroys us all. (my first comment ^.^) Now all you xbots can come and give me the thumbs down even though you know you're all ignorant morons who go from "Xbox is sooo kewl" and end the conversation with "Your mom!" Obviously you deserve a console that sucks your money right out of your wallet and then brings up the RRoD or the CD-scratching.

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hornetine

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@ Thirdrail1 Great post. Till this day, I still cant come to terms why ppl are willing to take a risk at a console that has such a high failure rate. Everyone, and I mean EVERYONE I know has the system break on them at least twice. Thats just pathetic, but alas, ppl still continue to buy it. It just may be the jabronis at gametop and bestbuy misleading moms into purchasing one because I have seen this happen with my very own eyes.

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_fark_

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Playstation has lost the console was for this generation. I know a few people who have bought the console and the only reason they did was for the cheap blueray player, never as a games console. I may have bought one a year or two ago if the price was lower but not now due to a lack of exclusive titles. Hopefully they will sort themselves out for the next gen.

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mbashour

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im planning on buying a ps3 this year...but dont know whether to wait for a price drop this winter or not...it's looking like a no.

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hornetine

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What are you roody-poos arguing about? A lower ps3 price benefits those cheapos that cant afford one at its current price. We ALL know a lower pried ps3 would dominate. Hint: even xbots are waiting for the price to drop

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