"Amidst the debate over the relative pricing of Sony’s (NYSE:SNE) PlayStation 4 and Microsoft’s (NASDAQ:MSFT) Xbox One, one element of interest is the cost of producing the consoles themselves, and what that means for the two console giants. A teardown by IHS iSuppli has estimated the cost of the parts of a PlayStation 4, and revealed that the console’s hardware is close to the cost of the console itself.Exploded View (Console)
"The last generation of Microsoft and Sony’s hardware was initially based on the razor and blade model: the hardware was sold at a loss, with the intention of recouping money on licensing fees and first-party software sales. Over time, the cost of parts and of manufacturing dropped: the PlayStation 3, which was estimated at launch to be losing up to $300 per unit for Sony, had trimmed the disparity down to $31.27 with the PlayStation Slim in 2009.
"That gap has been narrowed further in the PlayStation 4, not least by the use of more recognizably PC-based parts, rather than the PS3′s powerful but weird Cell processor, designed by Sony in partnership with IBM and Toshiba. IHS iSuppli, having totted up the parts costs, has come up with a total of $372, with an estimated $9 labor cost bringing it to $381 – $18 below the recommended retail price."