Sony reduces PS3 manufacturing cost by 35 percent

California, United States, December 30: According to a teardown analysis by market research firm iSuppli Corp., Sony Computer Entertainment has cut the cost of manufacturing PlayStation 3 (PS3) game console by 35 percent.

Analysis reveals that Sony Corp.’s new-generation PlayStation 3 (PS3) features a new cost-reduced design and also carries a combined Bill of Materials (BOM) that is 35 percent lesser than the first-generation model.

The new PS3 manufacturing and box content cost $448.73 while the first generation model was costing Sony $690.23. This cost doesn’t include other costs, including software and royalty expenses.

Sony, the world’s second- largest maker of consumer electronics, makes a significant loss on selling its first generation PS3 but this new cost reduced design could allow Sony to sell the PS3 at a profit, iSuppli said.

According to iSuppli, cost decrease is the result of normal learning curve and supply/demand factors that bring component prices down over time and integration of discrete components into the core silicon of the PS3. The new generation PS3 contains an estimated 2,820 individual parts, compared to 4,048 in the previous-generation model with a 60 G-byte hard drive. This also dramatically reduces the overall cost of the console.

“With its new-generation PS3, Sony has come closer to breaking even, although it probably hasn’t quite reached that mark yet,” said Andrew Rassweiler, director and principal analyst, teardown services, for iSuppli. “With iSuppli’s estimated PS3 cost at $448.73, the product retailing in the United States at around $399 and taking into account other expenses, the PS3 may be able to break even in 2009 with further hardware revisions.”

Key Integrated Circuits ICs) have been changed in PS3 that has more advanced process geometry compared to the previous model. To reduce power consumption and the number of discrete components in the console, 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 to 90nm before.

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 in the previous version of the console and the Kionix accelerometer is priced at 90 cents, down more than 60 percent from $2.35 for the previously employed component i.e. accelerometer from Hokuriku Electronic Industry Co. Ltd.