Sony's $399 PlayStation 4 costs roughly $381 to build, analysis reveals

By on November 19, 2013, 1:15 PM

Sony’s $399 PlayStation 4 is selling well at this point but as with all new tech gear (and especially consoles), one has to wonder exactly how much it cost to assemble the device and how much the manufacturer is making from each sale. And thanks to research firm IHS iSuppli, we now have an answer to both burning questions.

According to the firm’s teardown and cost analysis, the $399 PS4 cost Sony roughly $381 to assemble. The most expensive components are the AMD-designed APU and 8GB of GDDR5 memory which cost around $100 and $88, respectively. It’s clear that Sony isn’t making a ton of bank off each console but at least they aren’t losing money, either.

In fact, breaking even or even losing a little per console sold is a time-honored tradition in the gaming industry. The general consensus is that console makers try and get new systems in the hands of gamers as quickly as possible with the plan to make money back on game sales over the next several years. Furthermore, it becomes easier and cheaper to manufacture hardware as time passes due to the fact that technology improves the manufacturing process.

Even at a tiny profit or breaking even, Sony is doing much better this time around. The PlayStation 3 sold for $599 at launch but reportedly cost around $805 to build due to expensive custom components like the Cell processor and Blu-ray drive.




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1 person liked this | TomSEA TomSEA, TechSpot Chancellor, said:

I'm sure it's cheaper than that. You know they are buying components in quantities of millions from vendors and getting a big break on pricing as a result. It's not like any of us going to Newegg and paying "x" amount of dollars for a single stick of RAM.

Vrmithrax Vrmithrax, TechSpot Paladin, said:

Not surprising, if memory serves me correctly that new Blu-Ray drive was a originally a huge part of the cost on each PS3. Once there was more mass production and improved manufacturing processes, the cost of those drives dropped dramatically. But, for a while there, people were buying PS3s just to use primarily as a Blu-Ray player, since it was much cheaper than standard retail BD players...

wholesalestunna wholesalestunna said:

Hey, at least they're not losing money on the sales like Amazon chooses to do on their Kindle Fire Tablets. It would be interesting to see how much they really make on each console though. I'm sure it will be made up in the games and accessories though.

RzmmDX said:

I always wondered if they factored in the cut for vendors for selling their consoles?

So wouldn't the sale price to vendors be lower than $381?

Adhmuz Adhmuz, TechSpot Paladin, said:

I thought Sony already announced they would be taking a loss on every console until then end of first quarter next year. Some estimates are as much as $60 loss per unit. "the $399 PS4 cost Sony roughly $381 to assemble" now factor in the controller, that has to cost at least $25, parts + assembly. And then as already mentioned, the store selling the device has to make a cut, you have to get those consoles to the stores so add shipping charges, packaging. At the end of the day, I see the $60 loss estimate being probably pretty accurate.

On a side note, South Park has a new episode loosely based on the release of the PS4 and XBox1/Black Friday/Game of Thrones, pretty funny and impressive how they can make a satire around the three.

2 people like this | MilwaukeeMike said:

Weird isn't it? That an iPhone 5s sells for what $599 but cost around $220 to build, but a PS4 costs more to build and sells for far less. I guess that model of making the money back on games really pays off.

For all you PS4 fans out there, you should thank Microsoft for your $399 price tag. If the PS4 didn't have to compete with the Xbox 1 and only had the Wii U to go up against, I would bet their price would be a good amount higher. Same goes for the Xbox price.

wholesalestunna wholesalestunna said:

Oh wow, if Apple really only has to spend about $220 on new iPhones then they have to be making a killing. I've heard that they charge the cell phone carriers just below retail for them. That's a nice profit

Timonius Timonius said:

The profit, in console gaming, is usually in anything but the console.

Tekkaraiden Tekkaraiden said:

Well that's better news then a month ago when they figured they were going to loose $30 a console.

1 person liked this | Vrmithrax Vrmithrax, TechSpot Paladin, said:

Well that's better news then a month ago when they figured they were going to loose $30 a console.

I'd say they probably still are losing money... That number is how much it is to manufacture each unit. The sale price is the end user price, not the price the retail outlets pay per unit, which must be lower to make it worth the retailers' time to stock and advertise the product. I know Sony keeps the margins pretty tight, but even if they give 10% off for retailers, that's a $360 price point, so they would be losing at least $20 per unit in that scenario.

In the end, Sony doesn't care about small losses on the consoles. They (and Microsoft) reap the big money on licensing fees for each title released on their console.

wholesalestunna wholesalestunna said:

I'd say they probably still are losing money... That number is how much it is to manufacture each unit. The sale price is the end user price, not the price the retail outlets pay per unit, which must be lower to make it worth the retailers' time to stock and advertise the product. I know Sony keeps the margins pretty tight, but even if they give 10% off for retailers, that's a $360 price point, so they would be losing at least $20 per unit in that scenario.

In the end, Sony doesn't care about small losses on the consoles. They (and Microsoft) reap the big money on licensing fees for each title released on their console.

I'd love to see all the percentages of licensing fees and things that Microsoft and Sony make off the games and how much it costs to make them. I've always wondered.

1 person liked this | ghasmanjr ghasmanjr said:

For all you PS4 fans out there, you should thank Microsoft for your $399 price tag. If the PS4 didn't have to compete with the Xbox 1 and only had the Wii U to go up against, I would bet their price would be a good amount higher. Same goes for the Xbox price.

If there was no Xbox One nor Wii U, then there would not be a PS4 for at least a few more years. No competition usually causes a stint in innovation and general growth.

Forg0t2 said:

I thought Sony already announced they would be taking a loss on every console until then end of first quarter next year. Some estimates are as much as $60 loss per unit. "the $399 PS4 cost Sony roughly $381 to assemble" now factor in the controller, that has to cost at least $25, parts + assembly. And then as already mentioned, the store selling the device has to make a cut, you have to get those consoles to the stores so add shipping charges, packaging. At the end of the day, I see the $60 loss estimate being probably pretty accurate.

On a side note, South Park has a new episode loosely based on the release of the PS4 and XBox1/Black Friday/Game of Thrones, pretty funny and impressive how they can make a satire around the three.

This article is not taking in account the costs of the development. Research and development is a BIG pricetag that takes a few years to earn back since they make small profits on the console itself (looking at the assembly) I still think this article is incorrect about the assembly costs because it does not give any clearance about cooperations with other companies. It is viewed from a perspective that probably you and I should pay for if we buy like a couple hundreds of them. If they are working together with suppliers such as AMD (which I believe they do) lowers down the cost of the parts which lowers the cost of the assembly...

Guest said:

The exact licensing fee varies based on the manufacturer (Nintendo,Sony, Microsoft), as well as any deals they may give a publisher, but it can generally be anywhere from $3 to $10 per unit.'Wholesalers typically pay around $30 per game and with the costs of getting the goods to the wholesalers, any co-op advertising or marketing, and return of good contingencies being roughly $14 per game, the publisher is going to typically get $16 for every unit sold.

Skidmarksdeluxe Skidmarksdeluxe said:

Weird isn't it? That an iPhone 5s sells for what $599 but cost around $220 to build, but a PS4 costs more to build and sells for far less. I guess that model of making the money back on games really pays off.

For all you PS4 fans out there, you should thank Microsoft for your $399 price tag. If the PS4 didn't have to compete with the Xbox 1 and only had the Wii U to go up against, I would bet their price would be a good amount higher. Same goes for the Xbox price.

As Max Payne succinctly put it, "The one thing Americans clearly understand is capitalism".

Skidmarksdeluxe Skidmarksdeluxe said:

Well that's better news then a month ago when they figured they were going to loose $30 a console.

I'd say they probably still are losing money... That number is how much it is to manufacture each unit. The sale price is the end user price, not the price the retail outlets pay per unit, which must be lower to make it worth the retailers' time to stock and advertise the product. I know Sony keeps the margins pretty tight, but even if they give 10% off for retailers, that's a $360 price point, so they would be losing at least $20 per unit in that scenario.

In the end, Sony doesn't care about small losses on the consoles. They (and Microsoft) reap the big money on licensing fees for each title released on their console.

I agree with you. Even if they lose a bit of money on the consoles, they more than make up for that loss elsewhere.They are not a charity organisation pandering to fickle gamers out of the goodness of their hearts, they are there to make money and make money they will. Lots of it.

gamoniac said:

Weird isn't it? That an iPhone 5s sells for what $599 but cost around $220 to build, but a PS4 costs more to build and sells for far less. I guess that model of making the money back on games really pays off.

For all you PS4 fans out there, you should thank Microsoft for your $399 price tag. If the PS4 didn't have to compete with the Xbox 1 and only had the Wii U to go up against, I would bet their price would be a good amount higher. Same goes for the Xbox price.

Well said. I never understand why people must either love or hate something. Seems a bit extreme. I think it has to do with feeling too comfortable behind the keyboard, and saying things you wouldn't otherwise say in a face-to-face situation. And we all fall victim to that syndrome sometimes.

TheBigFatClown said:

@gamoniac, "Well said. I never understand why people must either love or hate something. Seems a bit extreme. I think it has to do with feeling too comfortable behind the keyboard, and saying things you wouldn't otherwise say in a face-to-face situation. And we all fall victim to that syndrome sometimes."

The reason for the love/hate relationship in the air right now when referring to Microsoft versus Sony is because of the perception, either real or imagined, that the company is not giving the customer what the customer wants. Mandatory online requirements for single player games, restrictions on the resale of games, etc. etc. So there are rational reasons for the love/hate relationship in play. So, while voicing your opinion from behind a keyboard does give people more boldness to speak their mind, it doesn't mean their thoughts and opinions are without good merits.

I think the internet is a great place for discussions because people do feel comfortably speaking more openly and honestly, being able to express their true thoughts about how they feel with regards to almost any issue.

I could say I hate Microsoft but if I did would it be true hate? Probably not. That would sap my positive energy and only hurt me. But I am betting on Sony for the win simply because they have shown an incredible willingness to listen their "customers"....you know those pesky little people who put the billions and billions of dollars into Microsofts and Sonys bank accounts? Yeah, those people.

You see what we got with Windows 8 when there was no competition? We got Windows 8 shoved down our throats. Oh but see how the XBox One becomes the XBox 180 when competition is involved?

In other words, the XBox One became the XBox 180 only because of Sony. With no competition Microsoft doesn't give a damn what their customers want. With no competition you get a middle finger from Microsoft. I.E., Windows 8.

I hope Sony crushes Microsoft with their Playstation 4. And even putting the argument I made aside for just a moment? I would purchase a Playstation 4 myself if I ever had to choose. It has a smaller, more aesthetically pleasing look for me personally. It looks like the superior design(integrated power supply, hell yeah) and, from what little I have read, the superior hardware. GDDR5 versus DDR3? That's like twice as fast for graphics memory.

So yeah 2 reasons to ditch Microsofts garbage. No customer appreciation and inferior hardware. Sony for the win.

Guest said:

I own a company and we manufacture products that "cost" over $100. However when in quantities of just a few thousand, that number drops to under half that to produce. Now if we were talking millions, that number would be significantly less.

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