Spiralling production costs due to expensive components are certain to hurt Sony as it targets another decade of dominance in the console industry. | Source: Shutterstock
- High-spec components could inflate the PS5 price.
- The cost of SSDs is already high and could head higher.
- GDDR6 graphics memory costs much higher than the one used in PS4.
There has been a ton of speculation about the pricing of Sony’s upcoming PlayStation 5 (PS5) console over the past year. Gaming analyst Michael Pachter had predicted last year that the PS5 could be priced at $800 with all the high-end components it will pack.
The novel coronavirus pandemic has made matters worse thanks to the supply chain disruptions that seem to be sending the price of key PS5 components through the roof. Though there has been no official word on pricing just yet, it won’t be surprising to see Sony’s next-generation console touching the price point that Pachter had estimated last year. Here’s why.
Key cost drivers of the PS5 suggest a premium pricing
To get an idea of the potential price point of the PlayStation 5 console, we need to go back in time. The bill of materials (BOM) of the PS3 in December 2009 stood at $326.5, according to IHS. At that time, dynamic random access memory (DRAM) used in the PS3 cost Sony just $9.80, while the hard drive cost an estimated $38.
The bill of materials of the PS4 suggests a premium pricing for the PS5. | Source: IHS
These two components together accounted for $47.80, or 14.6 percent, of the total bill of materials. Cut to November 2013, and the cost of these components accounted for a greater portion of the BOM in the PS4. While the cost of the hard drive stood at $37 for the PS4 console, DRAM cost went up to $88.
Together, these two components accounted for just over a third of the PS4’s total BOM of $372 as their combined cost went up to $125.
Not surprisingly, Sony had to raise the price of the PS4 console to $399 to account for the increase in component costs. This time around, the cost of DRAM and the storage that is supposed to be deployed in the PS5 could spike quite substantially.
Sony Computer Entertainment Inc. President and CEO Andrew House, left, Sony Computer Entertainment Japan President Hiroshi Kawano, right, and the first customer of PlayStation 4, kickstart the most-successful console of the last decade. | Source AP Photo/Koji Sasahara
Let’s begin with DRAM. Sony will use 16GB of GDDR6 RAM in the PS5 console. The cost of this new generation of graphics memory is significantly higher – around 70 percent – than the GDDR5 RAM used in the PS4.
At the beginning of 2019, 1GB of GDDR6 memory from Micron Technology was priced at $11.69 per chip. The cost of the 16GB chip was estimated somewhere between $110 and $150.
, but the bad news is that they have started moving north once again. The contract price DRAM shot up in the double digits last month. And now, the supply disruptions caused by the COVID-19 outbreak are sending graphics DRAM prices higher.
So, don’t be surprised if Sony ends up paying $100-$150 for each unit of the GDDR6 RAM that powers the PS5 console. That would be a 70 percent jump over the previous generation, and it won’t be the only major cost driver for the PlayStation 5.
The PlayStation 5’s SSD will bump costs further
We have seen that the price of the hard drive used in the previous generation Sony consoles was mostly consistent at less than $40 per unit. But that may not be the case this time around as Sony is slated to deploy a custom-made 825GB solid-state drive (SSD) in the PS5 console.
The price of a 500GB NVMe SSD from Kingston stood at around $60 in January this year, while a 256GB variant is priced at just under $37. So, the 825GB custom SSD that Sony is reportedly going to put into the PS5 could send the console’s storage costs somewhere around $100.
The problem for Sony is that the cost of NAND flash storage that’s used in SSDs is anticipated to jump 40 percent in 2020 as supply remains disrupted.
Sony could see over $100 in costs for the SSDs that goes into each PlayStation 5. As such, the combined cost of the graphics memory and the storage memory in the PS5 console could come in at $250, at least.
If prices continue to rise, then these components may further inflate the BOM as compared to the current expectations.
But even at $250, the combined cost of the PS5’s DRAM and SSD storage would be double that of the PS4 console. Meanwhile, the processor used in the PS4 was 20 percent more expensive than the PS3.
Assuming a similar jump this time, the custom chip used in the PS5 could come in at $120. Together, these three components could account for nearly $400 of the new console’s BOM.
The last time around, these three components cost Sony $225 in total. So let’s assume that the cost of other components, including the ray-tracing-enabled custom AMD RDNA 2 graphics card, remains the same. Sony needs to cover for the increased cost of these three key components, it may have to mean Sony will have to effectively raise the PS5’s price by nearly $200 to make a profit on console sales.
In that case, the PlayStation 5 will almost certainly swallow the production cost of a console that would likely total a consumer-cost price of $599.
Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com.
This article was edited by Samburaj Das.