How can Sony further cost reduce the entry-level PS3? *spawn

[Silent_Buddha]

The price of Flash is bound to drop some during this year, link.

Finally got a chance to look at that article and Anand's take on it.

The cost to Intel and Micron will probably drop. But due to demand don't expect prices to drop for the consumer. IE - as I said, I don't forsee much likelyhood that SSD prices are going to drop significantly this year (product not even available to consumers until Q4), and definitely not by half.

As well IMFT are fairly confident that they have a year lead at 25 nm. In other words, no competition means even less likelyhood of a significant price drop.

I think Anandtech's take that 2012 may be the year SSD's become affordable to the mainstream market, while optimistic is somewhat reasonable. Myself, I think demand is going to continue to be higher than supply and we'll only see modest price reductions with it still being too expensive for mainstream. Especially if other competitors can't keep up with Intel's traditionally aggressive shrinks and IMFT being able to leverage Intel's expertise in that area.

On a sidenote, I'm somewhat surprised at IMFT's confidence that they'll be able to continue scaling for a while below 25 nm. 10 nm already getting close to atomic sizes (~20 atoms across).

Regards,
SB

 

[NathansFortune]

Honestly, SSDs aren't going to become cost-effective for this type of situation for at least another couple of years.

The only thing Sony can do is continue their current course. Reduce the cost/size of internal components, get more efficient at making them and eventually make a real PS3 slim around mid/late 2011 with 32/28nm parts and an externalised power brick to reduce internal cooling costs.

There's nothing in the PS3 right now that isn't essential to either the gaming department or the marketing department. If there is I can't think of it.

 

[Crossbar]

As well IMFT are fairly confident that they have a year lead at 25 nm. In other words, no competition means even less likelyhood of a significant price drop.

Intel has basically been one process shrink ahead of the pack for the last 10 years in the CPU market and that has not hampered competition in my opinion. You can still be competetive on a different process, it all comes down to price and yields and what margins are acceptable.

But I agree that if demand grows faster than the supplies we will not see any price drops. Obviously the production volumes will go up significantly as so many manufacturers have just moved to new processes or are about to, but the demand due to smartphones and such will also keep going up.

Lets hope supplies will match demand, if not there is a risk manufacturers start to reallocate production from DRAM to NAND and we could see the price of DRAM going up as well as a consequence. Obviously the margins on NAND Flash are very good right now.

 

[Silent_Buddha]

Intel has basically been one process shrink ahead of the pack for the last 10 years in the CPU market and that has not hampered competition in my opinion. You can still be competetive on a different process, it all comes down to price and yields and what margins are acceptable.

Exactly and exactly how much did Intel drop prices with their process lead? Zero, until the competition caught up and forced them to reduce prices. Except in this case, by caught up, I mean only 1 node behind. It's why Intel is the darling of the industry when it comes to high margins.

A process shrink generally doesn't lead to consumer price reductions unless there's competition to drive down prices. A process shrink usually means higher margins for whoever gets there first. Prices don't usually drop until there's at least one competitor.

It remains to be seen whether IMFT MLC on 25 nm will be sold to other SSD manufacturer's. I doubt it however as demand is high and Micron and Intel will be able to reap the beneift, as Intel has in their past SSDs. If I recall correctly, none of those MLC chips were sold to other companies either. And only Kingston was allowed to sell a rebadged Intel SSD.

And the result? The Intel SSDs still have the highest USD/MB cost of all consumer level SSDs, despite generally having MLC chips on a smaller process.

In other words don't look for any significant price drops for consumers until Samsung can produce 25 nm MLC in bulk. Hynix is rumored to be close to doing 26 nm, but I have my doubts as to whether they'll be able to do it in high quantities, and similar to how Samsung overstated their 30 nm (actually closer to Intels 32 nm), I'm guessing it's also not as close to Intels 25 nm as their marketing would lead you to believe.

Regards,
SB

 

[Crossbar]

Exactly and exactly how much did Intel drop prices with their process lead? Zero,

That is not true, every time they will lower the price of their hi-end cpu line that is replaced by the new cpus and make them their new mid-range cpus. You got to look at performance/$ and GB/$.

If Intel can keep a high price in the cutting edge segment with high margins that is good for their business, but it doesn´t mean that the price in the volume segment can´t go down.

 

[Silent_Buddha]

That is not true, every time they will lower the price of their hi-end cpu line that is replaced by the new cpus and make them their new mid-range cpus. You got to look at performance/$ and GB/$.

If Intel can keep a high price in the cutting edge segment with high margins that is good for their business, but it doesn´t mean that the price in the volume segment can´t go down.

They don't drop the price of their CPU's with a new process node. Usually what happens is they release a slightly higher clocked variant at each price point, if there's some competition. Otherwise they update the line with faster offerings at higher prices.

The only time Intel lowers price is when they start to feel some competition from AMD in the CPU market. Intel are far more interested in high margins than they are in low margin/high volume.

And they have done the exact same thing with their SSDs. Only lowering prices when competition starts to eat into their sales. The drop in process node for the MLCs didn't factor into that at all other than to maintain their margins when competition forced them to lower prices slightly.

And this isn't anything limited to Intel. Almost all the tech companies do the same when they have no competition.

Regards,
SB

 

[Crossbar]

They don't drop the price of their CPU's with a new process node. Usually what happens is they release a slightly higher clocked variant at each price point, if there's some competition. Otherwise they update the line with faster offerings at higher prices.

I quote myself:

That is not true, every time they will lower the price of their hi-end cpu line that is replaced by the new cpus and make them their new mid-range cpus. You got to look at performance/$ and GB/$.

If they lower the price slightly before the introduction of the new cpus or at the same time as the introduction of the new hi-end cpus is irrelevant, the point is that new processes will bring more performance/$ and GB/$.

 

[Silent_Buddha]

I quote myself:

If they lower the price slightly before the introduction of the new cpus or at the same time as the introduction of the new hi-end cpus is irrelevant, the point is that new processes will bring more performance/$ and GB/$.

Again, if you reread what I said.

That only happens if there is competition. Otherwise, Intel generally releases at the same speed and price or introduces a higher speed model at a higher price. When they had a midlife refresh for the Q series quad core processors for a recent example. OCZ's 250 GB Vertex series drive for example got as low as 600 USD when competition entered the market. It has since steadily risen until it's over 800 USD now.

And sometimes they introduce slower models, on a new architecture, at a higher price. The Pentium 3 -> Pentium 4 transition for example.

This isn't limited to Intel either, AMD has done the same in the past. Although you'll find less cases of AMD doing it in due to them usually being behind Intel.

Price is almost purely driven by supply, demand and competition. Process nodes only affect margins and not final consumer price if there is no competition.

And if you look at SSD's over the past year, you'll see that there was a drop when more competition entered the market (unrelated to any process node changes) and has since continued to rise for the general market.

For Intel SSD's in particular it wasn't MLC prices or a new node that caused them to do their first price cut. It was the competition finally getting hold of a drive controller making other MLC drives somewhat competitive with Intel drives. In this case the Indilinx controller. With competition came price drops.

And right now with SSD being in greater demand than available supply, prices have actually risen over the last year, as my example of the OCZ drive illustrates. An almost 33% percent increase in price.

Regards,
SB

 

[Crossbar]

Again, if you reread what I said.

OK, let´s go back to the original text, which spawned this discussion, which is currently straying away.

As well IMFT are fairly confident that they have a year lead at 25 nm. In other words, no competition means even less likelyhood of a significant price drop.

I just have a different opinion that you can not make that conclusion because the competetion will also increase their production capacity even if it´s on a different process, if you think differently that is OK by me. Let us leave it at that.

 

[Silent_Buddha]

I just have a different opinion that you can not make that conclusion because the competetion will also increase their production capacity even if it´s on a different process, if you think differently that is OK by me. Let us leave it at that.

Probably, all I can say right now is that we'll be lucky if 2010 prices for SSDs goes back to early 2009 prices. And we'll be lucky if prices for SSD's goes down to half what they currently are in 2 years. Which won't even be half the lowest price in 2009.

And that's ONLY if MLC makers can ramp up production of MLC to meet current demand. Or the controller makers. I'm not sure which one of those two is constraining supply at the moment.

Regards,
SB

 

[Crossbar]

Probably, all I can say right now is that we'll be lucky if 2010 prices for SSDs goes back to early 2009 prices. And we'll be lucky if prices for SSD's goes down to half what they currently are in 2 years. Which won't even be half the lowest price in 2009.

And that's ONLY if MLC makers can ramp up production of MLC to meet current demand. Or the controller makers. I'm not sure which one of those two is constraining supply at the moment.

As I said before if demand grow faster than supplies we will not see any price drops, intel having a monopoly at the 25 nm process has nothing to do with that, whatever they produce has to be competetive with what the competetion offers.

 

[deepbrown]

Sony now loses $18 on every PS3 sold in the US (most likely making profit elsewhere eg. UK)

http://www.playstationuniversity.com/sony-now-loses-18-for-every-ps3-sold-2375/

Going down from over $800 to $318 is insane. Don't think anyone does cost reduction like Sony.

 

[Carl B]

Sony now loses $18 on every PS3 sold in the US (most likely making profit elsewhere eg. UK)

http://www.playstationuniversity.com/sony-now-loses-18-for-every-ps3-sold-2375/

Going down from over $800 to $318 is insane. Don't think anyone does cost reduction like Sony.

Well first of all if Oneda really does state that within that WSJ interview, that is indeed the most upfront declaration of this consoles costs we have ever received - or any console for that matter. That said, you can't say that it is $18, because you can't assume that they are using the full $300 when deriving the '6 cents on dollar' figure. Also, I personally don't like the localized currency conversion because it makes it seem like a fixed slider along the dollar when it is not.

As for cost reduction, it's not about Sony being the best at it (though between the three I think they are) so much as it is them incorporating a very non-mature technology at launch (Blu-ray) into the system, and using a chip whose die size and thermals were above what was expected when the project was launched. The PS3 was always going to see both the greatest absolute and percentage cost reduction, because its components began life as the most complex and immature.

 

[Prophecy2k]

In three years?!?! Frankly that's incredible

 

[Carl B]

It really really is not though. Three years ago we were having conversations predicting this, after all.

What was incredible is at what expense to themselves they were willing to launch the console in the first place! Always remember that bit of context.

 

[deepbrown]

Well first of all if Oneda really does state that within that WSJ interview, that is indeed the most upfront declaration of this consoles costs we have ever received - or any console for that matter. That said, you can't say that it is $18, because you can't assume that they are using the full $300 when deriving the '6 cents on dollar' figure. Also, I personally don't like the localized currency conversion because it makes it seem like a fixed slider along the dollar when it is not.

As for cost reduction, it's not about Sony being the best at it (though between the three I think they are) so much as it is them incorporating a very non-mature technology at launch (Blu-ray) into the system, and using a chip whose die size and thermals were above what was expected when the project was launched. The PS3 was always going to see both the greatest absolute and percentage cost reduction, because its components began life as the most complex and immature.

OK...6 cents for every dollar. Approx $15-$20 is a good guesstimate. And I expect they are talking about the US...

 

[Carl B]

OK...6 cents for every dollar. Approx $15-$20 is a good guesstimate. And I expect they are talking about the US...

I don't know if they are or if they are not - when it comes to currency choices for making this claim and a CFO discussing broadly the costs, I do not know whether it is 6 cents specific to the US or averaged per console. My inclination, though, would be to believe the later.

But again when I say $300 may not be the figure, it is because we do not know the number which Sony considers to be their 'price' for retail. Maybe they sell the system for ~$280 into the channel, who knows? I think we've had that discussion around here recently actually. Sure, it's a good guesstimate - but rather than drawing hard figure conclusions at all I just prefer to leave it in terms of ~6% BOM overage to sales price.

 

[Crossbar]

In three years?!?! Frankly that's incredible

The cost of the BD drive was a large part at launch, the adoption of BD as the HD standard has helped a lot to push that cost down.

It´s still not in the DVD territory but it is getting closer for every year that pass.

 

[Npl]

Sony now loses $18 on every PS3 sold in the US (most likely making profit elsewhere eg. UK)

http://www.playstationuniversity.com/sony-now-loses-18-for-every-ps3-sold-2375/

Going down from over $800 to $318 is insane. Don't think anyone does cost reduction like Sony.

Those $800 never were official values but the "work" of some analysts who apparently dont do anything else but summing up "market-value" of the components.
ie. if it cost Sony 100$ to produce a BD-Rom drive, and everything produced ends up in the PS3 then you will have to pay way more than just the costs of production to buy one of these directly. there where some ridiculous prices in the analysts breakdown

You might still count that as losing money if you could sell the drive at such outragous prices, but I dont think you could move alot of them this way.

 

[NathansFortune]

Well, I remember rumours of Sony losing around $300 per unit sold on the $599 model. So even $800 might be lowballing production costs.

I imagine the pilot run was over $1000 to make which is why the delay from Spring to Autumn.