PlayStation 5 Manufacturing Cost Reportedly Pushed Up to $450 Per Unit, Price Still Undecided by Sony

The PlayStation 5 will launch this coming holiday season, but Bloomberg reports that Sony is struggling with the price due to costly parts. According to “people with knowledge of the matter” the console’s manufacturing cost is currently at around $450 per unit. With the upcoming Xbox Series X expected to release in the same window, Sony has tough choices to make for the PlayStation 5’s price tag.

Sony usually finalizes the price of a new console by February of the release year. This follows with mass production during the spring. However, according to people with knowledge of the matter, Sony is “taking a wait-and-see approach” with the PlayStation 5.

So what does that mean if the PlayStation 5 ends up with a $450 unit cost? According to Macquarie Capital analyst Damian Thong the PlayStation 5’s retail price would have to be at least $470 if we include a similar gross margin. For example, the PS4 went for a retail price of $399 but was estimated to cost around $381 to manufacture.

Those familiar with Sony also said that the company is having trouble locking down a reliable supply of DRAM and NAND flash memory. Both, which are in high demand with smartphone producers gearing up for their next-generation devices.

When it comes to hardware, companies don’t often sell at much profit and sometimes at a loss but make up for it with software and subscription services. Sony Chief Executive Officer Kenichiro Yoshida argues that one should judge business by active users over hardware sales.

Some Sony games staff shared their opinion that the company should sell the PlayStation 5 at a loss if necessary to match the new Xbox. However, it appears that the Sony executives would prefer to sell for a profit, much as they did with the PlayStation 4.

According to the source, Sony already locked down most of the components for the PlayStation 5. This includes the cooling system, which usually doesn’t cost much but Sony decided to spend more in order to make sure that heat dissipation won’t be an issue for the new console. It’s worth noting that the ongoing Coronavirus outbreak has had no impact on PlayStation 5’s production preparations.

While the company has yet to decide how many PlayStation 5 units they’ll produce in the first year, the source added that we can expect to see the release of a new PlayStation VR headset sometime after the PlayStation 5 launch.

Bloomberg also notes that many of the games launched for PlayStation 5 will also be available to play on the PlayStation 4. This should keep the business performance intact with software and network services revenue. However, according to “people within the PlayStation business unit” a key factor in deciding the PlayStation 5 retail price will be what Microsoft decides to do with the Xbox Series X’s pricing.

The PlayStation 5 will launch in Holiday 2020.