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iSuppli: New PS3 Moving Toward Breakeven Cost

12/30/2008 09:47:00 AM Eastern

El Segundo, Calif. — A new bill-of-materials study on the latest iteration of the Sony PlayStation3 video game console by market researcher iSuppli has found the player costs are closing in on the breakeven point.

The study found that the new-generation PS3 player, with an 80GB hard drive, features a cost-reduced design enabled by the integration and key changes in components from the previous-generation model.

Based on pricing from October 2008, the latest version of the PS3 carries a combined Bill of Materials (BOM), manufacturing and box-content cost of $448.73, a 35 percent reduction from $690.23 for the first-generation model, using pricing from mid-2007, according to iSuppli’s Teardown Analysis service. This total doesn’t include other costs, including software, box contents and royalty expenses.

While a portion of the cost decrease can be attributed to normal supply-and-demand factors, the largest share of the savings came from “the clever integration of discrete components into the core silicon of the PS3, dramatically reducing the component count,” iSuppli said.

The new-generation PS3 contains an estimated 2,820 individual parts, compared with 4,048 in the previous-generation 60GB model.

“While the previous generation PS3 was sold by Sony at a significant loss, which the company made up for via game title sales and royalties, the new version may help stanch the hardware red ink,” iSuppli said.

Andrew Rassweiler, iSuppli teardown services director and principal analyst, said the PS3, which retails in the United States for $399, has a BOM cost of approximately $448.73. The research firm estimates the PS3 may be able to break even in 2009 with further hardware revisions.

The PS3 accounted for 16.4 percent of global video game unit shipments in the second quarter of 2008, second only to the Nintendo Wii, which accounted for 54.2 percent of the market, iSuppli said.

The report found that all of the key ICs in the new PS3 have undergone changes and employ more advanced process geometry compared to the previous model. These key parts, which include Nvidia’s Reality Synthesizer, IBM’s Cell Broadband Engine and Toshiba’s I/O controller, now are made using 65 nanometer (nm) process technology, compared with 90nm before. This helps to cut power consumption and to reduce the number of discrete components in the console.

Consolidation into core ICs also helped to reduce power consumption, enabling a less-expensive power supply. The new PS3 hardware features a Delta Electronics power supply (probably multi-sourced) priced at $21.50, down 30.1 percent from the $30.75 Sony part used in the previous version of the console, according to iSuppli.

The latest PS3 includes a new version of IBM's Cell Broadband engine as the central processing unit. The new component is priced at $46.46, down 27.9 percent from $64.40 before.

A new version of Nvidia’s Reality Synthesizer serves as the graphic processing unit for the game console. The revised version of the part is priced at $58.01, down 30.3 percent from $83.17 previously.