Xbox 360 "Half the Price of PS3" by Late 2006
By Christian Svensson Print | Send to a friend | Email the editor
Merrill Lynch has released a new breakdown of next generation hardware component costs suggesting that Xbox 360 "could be selling at half the price of PS3 in the latter half of 2006." Full stats breakdown inside...
The report puts a positive spin on Microsoft's future with Xbox 360 versus Sony's PS3. It includes estimated breakdown of hardware costs by component and shipping predictions. Particular emphasis on the manufacturing costs of each console has been paid in this report. Some of the highlights include:
"…The PS3 will not only be significantly more costly than Xbox 360 at launch, but will continue to operate at a cost disadvantage for several years. … We think that the Xbox 360 could be selling at half the price of PS3 in the latter half of 2006."
"…Our analysis indicates that Microsoft has a significant advantage in terms of cost. Taking Sony's weakened financial condition and Microsoft's deep pockets into consideration, we conclude that Microsoft's Xbox 360 should emerge as the early winner in the next round of the game console wars."
"Competitive pricing [for Microsoft] could hurt margins for Microsoft in the near term, but we think that Microsoft has the potential to exit 2006 with an installed base of 10 million units, with all that implies for more profitable software sales for 2007."
The report also states that ATI (GPU provider), Infineon (memory provider) and Marvel (licensed Microsoft to make an MMOG) could all benefit from an early lead on Xbox 360.
On the cost of goods side, Merrill Lynch believes that the Cell processor will initially cost $160 to make… more than the Xenon CPU which comes in at $100.
The graphics solutions will also be pricey. Both Nvidia's RSX and ATI's GPU will cost about $100 each. Price reductions over time will eventually get the parts to about $30.
Blu-Ray is also cited as an expensive solution for PS3. The cost of the drive is estimated to cost at least $75.
On the RAM side, Microsoft again is expected to have some advantage using GDDR3 given its availability on the open market. PS3's XDR main memory is "not a product that has gained acceptance elsewhere", implying some sort of additional risk or cost.
On the Hard Drive front, it predicts that PS3 will not have one included standard, but like Microsoft, it will be an add-on.
The report predicts that Microsoft will break even in year one of the 360's release and that profits will come in year two. The report predicts that 2 million hardware units will be sold in 2005 with 7 million shipping in 2006.
A lot of the predictions made are based upon the assumption that Sony will not take a significant loss on the hardware (which it believes to be the case given Sony's recent financial pressures). If Sony is willing to be aggressive on pricing with PS3, the report conceeds that many of these numbers are likely to change.
Costs By Hardware
PlayStation 3 Component Est. Cost at Launch Est. Cost after 3 Years
CPU IBM Cell $ 160 $ 50
GPU Nvidia RSX @550MHz $ 100 $ 30
Optical Media Blu-Ray $ 100 $ 30
Memory 256MB XDR/256MB GDDR3 $ 60 $ 30
HDD detachable 2.5" HDD NA NA
USB 6 ports $ 5 $ 3
Ethernet gigabit ethernet $ 5 $ 4
Wi-Fi 802.11b/g $ 5 $ 3
Bluetooth Bluetooth 2.0 $ 10 $ 5
Other Analog IC, ASICs, I/O $ 50 $ 40
Total
$ 495 $ 195
Xbox 360 Component Est. Cost at Launch Est. Cost after 3 Years
CPU IBM PPC $ 100 $ 35
GPU ATI GPU $ 100 $ 30
Optical Media DVD-ROM $ 25 $ 10
Memory 512MB GDDR3 $ 50 $ 25
HDD detachable 20GB HDD $ 25 $ 15
USB 3 ports $ 5 $ 3
Ethernet Ethernet $ 5 $ 4
Wi-Fi 802.11 a/b/g $ 5 $ 3
Controllers up to 4 wireless NA NA
Other Analog IC, ASICs, I/O $ 25 $ 20
Total
$ 340 $ 145
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