A new report from Bloomberg indicates that Sony is experiencing some manufacturing troubles as a shortage of components could result in the company pricing the upcomingPS5a bit higher than expected. With an estimated bill of materials running at about $450 per unit, it’s pretty clear that Sony’s next console will cost more than its predecessor did at launch.
The main problem in this situation, as per the report, comes from a shortage of DRAM and NAND flash memory components. The report states that the shortage could be caused by an incredibly high demand for these components from companies like Samsung which are gearing up to launch the next generation of smartphone devices. Due to the shortage, Sony may have to resort to selling thePS5at a loss (which isn’t uncommon among console makers), but this has also affected the company in some other ways as well.
Although the report focuses primarily on the PS5, a shortage this problematic presumably has some effect on the upcomingXbox Series Xas well. There hasn’t been any word out of Microsoft, official or otherwise, but this could affect the start of the next generation of console gaming as a whole.
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The Cost of Shipping the PS5
The report from Bloomberg stated that the shortage has already caused a significant shift in Sony’s release strategy for the PS5 when it launches later this holiday season. Even though the estimate of cost per console lies at about $450, this is merely the starting point in the range forwhat price Sony can sell the PS5at. Not included in the price tag (that runs higher than a PS4 Pro) is the cost of packaging, shipping, retail stocking, etc. that makes each unit cost even more for Sony.
This means Sony has a few choices with thePS5’s price. It could try and sell the console at a high enough price to cover all of the above costs and potentially make a profit on each unit, but at the risk of alienating consumers with a price that eats up their budget. Alternatively, and more likely, it could sell the console at an initial loss but make up for it with a higher amount of software sales. The latter has been practiced by every console maker and seemingly more often than not.
The shortage has had some other notable effects on Sony as per the report such as the cancellation of a mirrorless camera that was initially planned to be released alongside the PS5. This ties into the report also stating that Sony’s next version of the PSVR is due to arrive sometime after the PS5’s launch. Elsewhere in Bloomberg’s report, it is mentioned thatSony will focus on cross generation gamesto aid in the transition of consoles.
One thing that has driven the cost higher than usual is Sony’s choice of cooling system for the console indicating how seriously the company is tackling heating issues. There seem to be plenty of factors impacting the production of Sony’s new console but the report does confirm that the newest outbreak ofcoronavirus hasn’t affected the PS5, contrary to previous predictions.
The Cost of Competing with Xbox
Sony had good fortune with the launch of the PS4 (which it made profitable, through hardware, almost immediately) but the PS3’s history is almost the exact opposite situation. Even though the company marketed the console with two SKUs at $499 and $599, Sony still took a huge loss with each unit sold costing the company hundreds of dollars each. This was due to the manufacturing cost of the PS3 being so high which was in part due to Sony’s expensive cell processor technology.
Luckily, it seems for now that Sony has slight wiggle room to sell the PS5 at a price that both satisfies consumers and the cost of manufacturing each unit. Still, the report stated that the aforementioned shortage of parts has led Sony to adopt a wait-and-see approach in regards to the Xbox Series X. Microsoft is likely to announce the price of its upcoming console (and presumably the other console in the Series X line) atE3 2020, meaning Sony will have to wait until then to see what Microsoft has planned.
Typically consoles releasing in the fall will start being manufactured around the spring season of the same year, so it’s interesting to see Sony attempt to try and balance hitting its milestones while looking at its competition. This could of course change if Microsoft decides to announce its pricing structure earlier than E3 2020. Until one of the console makers makes a move soon, it’s still unclear where thePS5 and Xbox Series Xwill stand on price.
