Defective PS4s Are Within ‘Expected Range’ for New Product, Says Sony

Race acknowledged there were “several issues reported” by consumers, which “leads us to believe there isn’t a singular problem that could impact a broader percentage” of PS4s. “We also understand that some units were reportedly damaged during shipping,” he said. The company understands the “frustration of consumers that have had a problem and are working with them and our retail partners to help troubleshoot issues and ensure affected units are exchanged,” he said.

SCEA declined to say if the majority of affected consoles were sold by Amazon, or if there also were issues with PS4s sold by other retailers. Hundreds of Amazon customer reviews gave the PS4 only one star, some complaining their consoles were “DOA” and saying there was a “flashing blue light” (CED Nov 19 p7). Others complained of faulty HDMI ports and issues that developed only after they downloaded a Sony update.

Target Guest Relations didn’t receive “any questions or concerns about hardware defects,” said Target spokeswoman Erica Julkowski. Like other retailers, Target had only “limited” PS4 inventory, but “will continuously replenish inventory in the coming weeks,” she said. Toys R Us didn’t hear of any consumer complaints about PS4 hardware defects either, said spokeswoman Nicole Hayes. Best Buy, GameStop and Walmart didn’t comment.

SCEA declined to comment on IHS’s preliminary PS4 teardown finding that the console’s hardware costs were near “breakeven.” For the past seven years, Sony fielded a few revisions of the PS3, “many of which were sold at a loss,” IHS said in a news release. But Sony produced a design for the PS4 whose component and manufacturing costs are starting out lower than its $399 retail price, said IHS. That paves the way for Sony to “quickly attain profitability” on hardware sales, said IHS. The PS4’s bill of materials (BOM) totals $372, said IHS. When the manufacturing expense is factored in, the cost rises to $381, said IHS. When other expenses are factored in, Sony will still initially “take a loss on each console sold,” said IHS. But the “relatively low BOM” of the PS4 will enable Sony to break even or attain profitability in the future “as the hardware costs undergo normal declines,” said IHS. Not factored into IHS’s estimates were costs including software, licensing and royalties, it said.

It was a significantly different case with the PS3, said Andrew Rassweiler, IHS senior director-cost benchmarking services. The BOMs for most of the different PS3 SKUs were greater than their retail prices, “in some cases by more than $100,” he said in the news release. Sony was able to significantly lower the PS3’s costs during its life cycle, but the company’s “intent was never to make money on the hardware, but rather to profit through sales of games and content” only on the older console, he said.

Sony was able to keep a lid PS4 costs by “focusing all the additional expense on the processor and memory,” while “reducing outlays” for the optical drive, the hard drive and other subsystems, said Rassweiler. It’s even cheaper for Sony than the CECH-2001A PS3 SKU introduced in 2009 that IHS estimated had a $336 BOM and a $299 sale price, he said. The costliest subsystems in the PS4 are its core processor and associated graphic dynamic random access memory (DRAM), which together make up $188, slightly more than 50 percent of the BOM of the entire console, said IHS. With the PS4, Sony integrated two functions -- the core central processing unit (CPU) and graphics processing unit (GPU) that were two discrete integrated circuits (ICs) in the PS3, said IHS. The PS4’s Advanced Micro Devices processor includes an eight-core Jaguar CPU and Radeon GPU, and costs $100, IHS estimated, compared with an $83.55 combined total for the two prior, equivalent ICs from IBM and Nvidia that were used in the PS3 that IHS analyzed in 2009. It estimated the PS4’s DRAM cost at $88, up from only $9.80 in the PS3, although that didn’t include the DRAM that was mounted directly to the Nvidia processor in the PS3 that IHS analyzed in 2009, it said. The DRAM cost increase was because of the PS4’s adoption of advanced Graphics DRAM (GDRAM) GDDR5, said IHS. GDRAM DDR5 memory has “much higher bandwidth” than the DDR3 used in the Xbox One, it said.

The fact that expenses for other subsystems of the PS4 were the same or lower than those in the PS3 helped offset the increased costs for the processor and memory in the PS4 compared with their costs in the PS3, said IHS. The largest area of cost reduction was in the optical drive, at only $28, down from $66 for the CECH-2001A PS3, it said. The optical drive mechanism was “largely unchanged” since 2009, so Sony was “able to capitalize on the dramatic price erosion” on that component during the past four years, said IHS. Sony cut another $10 from the BOM by using a more integrated design for the PS4, said IHS. The new design enabled Sony to lower the number of small-sized ICs, discrete semiconductors and passive components, said IHS. The total cost of those devices was $40 in the PS4, down from $50.23 in the CECH-2001A PS3, it estimated. Another $5 reduction was achieved in the mechanical portion of the design, including enclosures -- like plastics and metals -- and in the electro-mechanical content, including printed circuit boards, connectors and wire harnesses, it said.

The PS4’s hard drive was $1 cheaper than the one in the CECH-2001A PS3, despite the large increase in capacity to 500 GB, up from only 120 GB, said IHS. The reduction to $37 reflected the significant decline in hard drive costs over the past four years, it said. Other components in the PS4 include a Panasonic HDMI transmitter, said IHS.

The best-selling videogame for the PS4 so far in North America was Activision Blizzard’s Call of Duty: Ghosts, the publisher said Wednesday. The game quickly became the No. 1 title for the PS4 in retail sales and is also the No. 1 pre-reserved Xbox One title at Best Buy, GameStop, Target and Walmart in North America, said the publisher. The Xbox One launches Friday and Activision’s game will be available for that console on day one, it said.

The Xbox One will not be able to play music from a USB stick at launch, said Albert Penello, Microsoft director-product planning, in a Twitter post, not saying if that functionality will be added later. The Xbox One will play CDs at launch but, as with the PS4, users won’t be able to store or play MP3s on the Xbox One at launch, said Microsoft.

Several Xbox One launch events will be held, including one by Microsoft at the Best Buy Theater in New York’s Times Square area Thursday night into Friday morning, it said. GameStop plans launch events at more than 4,200 U.S. stores, some starting as early as 6 p.m., although consoles won’t be sold until 12:01 a.m. Friday, it said. Like with the PS4 launch last week, the vast majority of Xbox One consoles available at launch at GameStop and other retailers that ran pre-order campaigns are expected to be limited to units already reserved months ago by customers.

Toys R Us will hold a midnight launch event at its flagship Times Square store, where the console will start being sold at 12:01 a.m. Friday, it said. Other Toys R Us stores will open at their normal times Friday morning to sell the Xbox One, but Toysrus.com will start selling the console at 12:01 a.m. also, it said. The retailer is also offering two deals through Saturday. In the first, consumers who buy any two Xbox One or Xbox 360 games or accessories at $59.99 or more each will get a $15 Toys R Us gift card. Customers who buy any three games or accessories for those systems will get a $50 gift card, it said.