PS4 Teardown Shows Console Costs $381 to Manufacture

UPDATE: You can read IHS' press release on the breakdown here. 

ORIGINAL STORY: IHS has performed a teardown of the PlayStation 4 which has been seen by AllThingsD and reveals that the console costs $381 to manufacture – just $18 short of the $399 retail price. 

While this leaves a very minimal profit margin for Sony they're in a much better position than they were in 2006 when they launched the PlayStation 3 which was sold at a significant loss.

IHS conducted a similar teardown analysis of the PS3 and determined that it cost about $805 to make the console that sold for $599. As time went by the cost of manufacturing the PS3 fell and Sony cut the price of the PS3 to encourage more sales. In late 2009, IHS believed that the PS3 cost $336 to build even though it was being sold for $299. 

Andrew Rassweiler, an IHS analyst in Los Angeles who oversaw the teardown, commented: 

“If Sony could build the PS4 for a lower cost it would do so, but if history is any indicator, it would also lower its retail price.”

The cost of the processor and the memory works out at $188, almost half of the total cost of building the system, Rassweiler added. Additional costs such as the controller ($18), the hard drive ($37), and the optical drive ($28) bring the total to $381.

Rassweiler noted: 

“If your cost is within $10 to $20 of the retail prices, there’s very little chance you’re making a profit on the console. It looks like once again, when it comes to profits, it’s all about the game titles."

We can likely expect a similar breakdown of the Xbox One once that system is released. The PS4 has performed well so far, shifting one million units in North America on its first day.