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Sony already close to breaking even with PS4

Sony sold various editions of the PlayStation 3 at a loss but may already be close to the break-even point with its new PlayStation 4 game console, according to IHS iSuppli.

IHS's Teardown Analysis Service on Tuesday reported that the bill of materials (BOM) for PS4 hardware plus manufacturing costs is estimated at £236, or £11 lower than the console's $399 (£247) price tag in the United States.

IHS guessed that after additional expenses accrued in shipping and distribution of the PS4, Sony "initially will still take a loss on each console sold." But the research firm noted that the normal lowering of hardware costs over time put the company in a good position to attain profitability on its next-generation console reasonably soon.

Sony is spending an estimated £231 on hardware for each PS4, according to IHS. That BOM estimate is further broken down in the chart below, which also compares the estimated cost to build Sony's new console with the cost to make the $299 (£185) PS3.

"When Sony rolled out the original model of the PlayStation 3 in 2006, our teardown analysis revealed that the console delivered supercomputer-class performance at a price equivalent to a notebook PC," Rassweiler said.

"However, this achievement came with a major downside for Sony, as the BOM costs for most of the different versions of the console were in excess of the retail prices, in some cases by more than $100," he continued. "Although Sony brought the PlayStation 3's costs down significantly during its lifetime, the company's intent was never to make money on the hardware, but rather to profit through sales of games and content."

The consumer electronics giant is clearly taking a different route with the PS4, the IHS researcher argued.

"This time, Sony is on a greatly shortened path to the hardware break-even point, or even profitability, with its cost-conscious PlayStation 4 design. The company is pulling off this feat, despite offering a brand-new design that once again includes avant-garde components that yield superfast performance," Rassweiler said.

"The PlayStation 4 keeps a lid on costs by focusing all the additional expense on the processor and memory — and reducing outlays for the optical drive, the hard disk drive (HDD), and other subsystems."

IHS listed the suppliers of key hardware components for the PS4 as Advanced Micro Devices, Fujitsu, Samsung, Qualcomm Wolfson Microelectronics, Bosch, Panasonic, Macronics, Marvell, Genesys Logic, Rohm, Windbond Electronics, Skyworks Solutions, Renesas Electronic, STMicroelectronics, International Rectifier Corp., and Sony itself.

The most expensive bit of hardware in the PS4 is AMD's custom accelerated processing unit (APU) and associated graphics memory, which IHS priced out at £116 per unit. That's more than half the total BOM per console, up from the 29 per cent of the hardware bill Sony devoted towards the main processor powering the PS3, according to the research firm.

For the money Sony is dropping on AMD's 28-nanometer APU, PS4 users are getting a "monster" of a processor, noted IHS consumer platforms analyst Jordan Selburn. The brains of the console combines an eight-core, "Jaguar"-class central processor and a Radeon graphics processor, priced out at £62 a pop versus the £52 for equivalent chips supplied by IBM and Nvidia for the PS3.

"Sony clearly has made the decision to focus on balancing the brains and economics of the console, with the processor and memory dominating both the design and the BOM," Selburn said.

"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."