A recent report from Bloomberg indicates that Sony is having some manufacturing troubles with the upcoming PS5. Specifically, a shortage of components might cause the launch price of the console to be higher than initially anticipated. Given Sony’s infamous history with the pricing of the PS3 at launch, this holiday season could potentially bring back some ugly memories for fans if Sony ends up botching the whole operation.
There are a lot of factors affecting the launch of the next generation of gaming consoles (problems that affect PlayStation as a gaming company can presumably affect Xbox as well). This new Bloomberg report is just another brick to add to the wall of concerns that is building around the eventual sale of the PS5. Unless Sony decides to delay its next generation console to sometime in 2021, then these signs could result in a premium price for the PS5 at launch.
What The Shortage Means For PS5
The report from Bloomberg outlines a particular shortage of DRAM and NAND flash memory components that come as a result of the latest wave of smart phones. On February 11, Samsung unveiled its Galaxy S20. One of the biggest draws of this new line of phones/tablets is the fact that customers can choose whether they want 8 GB or 12 GB of RAM for their new devices. This amount of RAM in a smart device isn’t exactly common and in fact can often be found in most regular-build desktops and laptops by comparison.
In any case, the large amount of RAM that these phones are being built with is largely to blame for the shortage of parts necessary to build the first line of consumer PS5s at this time, creating a situation in which the parts become more expensive for Sony due to the shift in supply and demand. The report states that this shortage has already had a aserious effect on Sony’s long-term plans.
Apparently, Sony was planning on shipping a new mirrorless camera later this year as well, likely to have been a PS5 launch peripheral equivalent to that of the PS4. It also now plans on shipping a new version of PSVR after the launch of the PS5, according to Bloomberg’s sources, meaning Sony is likely to release the new camera and PSVR unit at the same time.
The Galaxy S20 releases on March 6 which is just a few weeks shy of when Sony typically begins mass production of a new console releasing later in the year. With the price of these parts going up, Sony might have to either markup the price of the PS5 or bite the bullet and sell it at a loss. The estimated bill of materials for each PS5 unit so far is around $450 which doesn’t take into account the shipping and retail fees per unit. It is partly due to Sony’s choice in premium cooling for PS5, but there are also other factors that could play a role in the cost.
It was initially thought that the newest outbreak of coronavirus would delay the PS5 and Xbox Series X before the consoles went into mass production. This is due to the fact that Sony and Microsoft usually partner with FOXCONN, a Taiwanese manufacturing company that mostly operates throughout east China (along with most other major tech corporations such as Apple and Samsung, which caused this shortage in the first place).
Bloomberg’s sources have stated that the outbreak has had no immediate effect on the production of PS5, even though the coronavirus delayed some other games in the process. Interestingly, the same sources have stated that Sony will be focusing on cross generational games in order to sustain sales through the hardware transition. This is probably not due to the outbreak though, as consoles typically launch with a light catalog of new games.
Ugly Flashbacks To Sony’s Past
In 2006, Sony announced that it would sell two SKUs of the PS3 priced at $499 and $599. This was a huge deal at the time that permanently stained the history of the PS3. Sony didn’t have it good either way though, as each sale of the highly priced console caused the company to lose hundreds of dollars per unit (a loss of at least $300 per 20 GB unit) which eventually amounted to an over three billion dollar loss.
With this new report, a price hike on the console could cause a similar situation to the PS3’s launch, the only difference being that Sony would actually make a profit on each PS5 unit as it’s nowhere near as expensive as the original production cost of the PS3 (which cost $840 to build at launch).
The Absolute Highest PS5 Price Sony Can Get Away With
The report from Bloomberg estimates that Sony would need to reveal the PS5 with a minimum price of $470 in order to make a profit on each unit. However, that price isn’t a typical one used to sell consoles and was only derived by calculating the difference between the production cost of the PS4 (around $380) and its launch price of $399. The PS4’s launch price was everything fans needed to be praise Sony at the time as it both undercut the Xbox One by $100 and shattered the bad memories of the PS3’s launch.
Although fans will not see a price that low for the PS5, there is still some hope that the launch price won’t be too egregiously high. It isn’t uncommon for console makers to sell hardware at a loss (to make up for it in software sales) so the absolute maximum price that Sony should sell the PS5 for is $499. It might even be able to make a small profit depending on the ultimate price of production per unit.
Sony cannot exceed $499 as a launch price for the PS5 as this could easily bring up parallels to Sony’s unfortunate episode in 2006. If the company still wants to have its console priced competitively with the Xbox Series X (the price of which Sony is anticipating), then it might need to resort to drastic solutions. However, fans should at least rest a little easier knowing that Sony wouldn’t want a repeat of the past either.
The PS5 is scheduled to launch holiday 2020.
