Merrill Lynch's Next-Gen console prediction

[mckmas8808]

You mean "percieved errors."

I think they have better access to financial details than we will ever have. Thus, they get a HUGE benefit of the doubt.

No I mean errors. I seriously doubt the CELL will cost $160 and both GPUs will cost $100. Have you guys ever heard of economies of scale? I don't think you have.

I seriously don't think MS is thinking that they can sell more 360s than Sony can PS3s.

 

[Bobbler]

As its been hinted at before... but...

I'd love to know how ML got access to the BOM for Xbox360 and PS3 -- especially Sony's, being ML can't just go to Sony's manufacturers (RSX/CELL are fabbed by Sony) like they could with Xbox360 (persuading TSMC or NEC, or whoever). ML and firms like it make their money by making guesses, they often don't have the data -- they get paid a lot for making good guesses, sometimes they are wrong -- guessing console prices/bom costs doesn't seem to be their speciality (or any other analyst firm's). I fully believe that B3D could come up with a better BOM sheet than the little 'mystery math' one that ML had in their PDF (given the time and motivation -- there are a lot of sneaky people here with information in that realm). However, I wouldn't trust B3D to come up with the BOM cost and such on something like a new car from Audi or the cost of a running a farm and what it takes to be profitable, or just general stock analysis, really -- I'd believe whatever ML gave me, since its inevitably going to be a bit more accurate than what I could come up with. ML would be a lot richer if it was able to correctly predict these kinds of things, any company would.

Additionally, Sony would have the craziest fab in the world of RSX cost less to fab than Cell (especially by a nearly 40% margin). I'll leave it at that.

Edit:
Don't get me wrong here, PS3 will inevitably be more expensive to make just by the fact that BR is in it. The actual cost difference between the PS3 and Xbox360 is not likely to be as much as ML seems to think, though.

Another thing ML seems to be missing is context -- Vince hinted at this; Almost no Cell manufactured for PS3 would go to waste as it could be used in a TV/CE device later (even with defects as long as PPE, i/o logic, and at least one SPE works). They don't take into account advantages of things like that -- MS probably has some advantages like that that are getting ignored too (like the fact that they don't actually need to run facilities to fab chips, etc, etc). Taking a sheet with a bunch of speculated costs and making any sort of decision financially about a company or a product is completely absurd at best.

 

[scooby_dooby]

If cheaper cost is the dominant factor for success, as it's seems to be obessed over on this forum, how come Nintendo is not winning the console race?

obviously that's oversimplifying it. The game library is what really matters, but when you take a better or equivalent game library(which GC never had) then add a lower price, then it's a recipe for success.

 

[Laa-Yosh]

Software is indeed missing from the analysis. Now, Sony has two main strengths here, their own franchises like the GT series, and all the best selling 3rd party games like MGS, FF and so on from the previous two generations of the Playstation. It's a safe bet that they'll be able to capitalize on the first with the PS3 as well.

However, developers and publishers of the big 3rd party franchises may have to face a tough decision in the late 2006/ early 2007 timeframe. At this time, if all goes well for Microsoft, there may be 8 to 15 million Xbox360s sold; whereas Sony may still be under 5 million, maybe even 3 million, if they would indeed start in the US and Europe in late 2006. (Note the two "if"s before you start to reply ). These figures are primarily based on manufacturing potential; MS indicated that they should be able to produce 4-5 million Xboxes in 6 months, so their advantage could be anywhere from 5 to 10 million units. Thus, any game released at this time would have as much as twice the market and the sales potential on the Xbox, compared to the PS3. This is very important if you consider nextgen development budgets.

There are of course many other factors that have to be considered here by the publishers. Their costumers may be loyal to the Playstation brand and releasing a FF game on the Xbox could turn into a financial disaster. Betraying Sony in such a way could also have consequences. It's also safe to assume that PS3 will sell very well from mid 2007 and reach a very large user base by 2008.
On the other hand, if the market actually turns out to be that way, then there would be a huge potential for the first (few) big franchises released on the Xbox. We do not yet know all the X360 games in development, but it's a safe bet that most of them are from the same devs and franchises that we know from the first Xbox - so there's certainly room for well-known names. For all we know, these studios might already be watching each others' moves... and who knows how many would follow, if one decides to go for it.
And for all the politics and fan expectations, next gen development is still heavily driven by money. 10-20-50 million dollar projects won't break even with sales under a million copies, and both studios and publishers are driven by businessmen, who probably care more about the math and the balance sheet.

So, in my opinion, software will be the most important factor with this gen as well; but a larger installed base in 2006/2007 may give MS an advantage in that field as well.

 

[Vince]

Hunh? The difference between 168mm2 and 235mm2 is significant and fairly large.

A already addressed this point, I see no reason why you should be arguing it.

Sony had edram as did GC. I would agree with you when it comes to assembly costs and yield timing across separate assembly lines but each manufacturer/fabber (NEC and TSMC) is highly capable of producing required chipsets on-time with high yields.

Sony's eDRAM was/is a CMOS process; which used a stacked capacitor design on the same die and using he same lithography technology as their logic. For them, cost scaling was inline with the bound imposed by Moore's Law, to any noticable degree, no different than if it was a full logic ASIC.

Microsoft's solution is a bulky MCM which uses two dies that are manufactured into a single end-product. It requires double the fab capacity, additional manfacturing capacity and most importantly[/i] the MC imposes a fixed-cost upon the device which doesn't scale! They still need to take the two independantly fabricated ICs, bring them together, bond and put them in an MCM. I question, given the sub-par scaling of embedded processes outside of OTSS (Sony/Toshiba) compared with pure logic scaling as well as any electrical differences between fabs how soon and when (if ever) the two products will become a single SoC. And, untill then, they are stuck with sub-par cost scaling which will be left in the dust by Sony's aggressive semiconductor strategy if their movement on PlayStation2 was any example (eg. 90nm in fall of 2003).

I disagree strongly and although I cannot find the quote, MS surely has plans to consolidate the edram with the mainengine as soon as the manufacturing process allows it (probably @65nm and surely at 45). I dont know where you get your suppositions from but they are awkward in how unrealistic they given your fairly advanced knowledge of fab techniques and timing.

I would love to see the quote. I question not the area requirements, but many things concerning the ability to eventually assimilate two totally seperate lithography processes with electrical properties that are likely different onto a single die that can be produced in one pass as on the Graphic Synthesizer, the EE+GS, or the PSP IC.

I also question the timeliness of this, as I stated outside of OTSS, embedded processes are somewhat lagging behind their logic cousins. I'm quite confident than Sony will be in advance of Microsoft when it comes to agressive downsizing of their ASICs via process shifting.

Again do you think that IC knowledge and consolidation is the realm of Sony only?

I never said that only Sony could do it! I was stating that Sony has the advantage in that they can do the work inhouse, fabricate the parts inhouse and do it at an accelerated timescale as compared to Microsoft. Hell, we don't even know if the economics will be there for such consolidation on Microsoft's side!

cell is way more complex than xenon but you expect it scale more quickly? the main engine of xenos is less complex and large than RSX... the Edram is the only monkeywrench but ...

Complexity is irrelevent for the approximation's we're doing, it comes down to the bounding functions of gross area and redundancy AFAIK. We can extend this to the fact that the XCPU can be produced in a single mask pass I believe, but again, it's 6 of one, half-dozen of another. I would assume on a per-CPU level, the XCPU will be more inexpensive; but I don't expect the same to hold when viewed globally across the Sony Group once they start utilizing Cell in their product line due to the reasons I've stated many times.

RSX is a bulk CMOS design which will scale beautifully down to 65nm, 45nm and beyond. The XBox GPU is not analogous, it's a clunky design which has additional fixed costs which don't scale at all.


And I do appologize that you can't side with me now. Perhaps tomorrow. I will try my best

 

[AzBat]

Thanks for this,

UBS internal reports are hard to get hold of.

Don't thank me. Thank Spartan_85. He's a member to these forums and it seems has posted reports like these before.

BTW, I have Jon Peddie's Console Market white paper. It's free for Tech Watch subscribers. If you're not a subscriber then it's $50. It can be purchased on their web site.

Tommy McClain

 

[expletive]

If cheaper cost is the dominant factor for success, as it's seems to be obessed over on this forum, how come Nintendo is not winning the console race?

PS3 is more cost, for more functionality, and more power. It worth paying more for, and a PS3 priced $100 more than the Xbox 360 will still beat it in number of units sold by Christmas 2006.

My statement was that if the 360 ends up being half the price of the PS3 by holiday 2006 and there is not a discernible difference in quality or franchises to the consumer, that it will affect sales. How much or whether or not it will win the 'console war' i dont know.

You assume that the added PS3 features are all items on every consumers checklist and the fact is theyre not. A lot of consumers wont care about a cell processor bluray drive or 2 HDMI ports. "Worth paying for" is not based on the sum of the parts, its based on the wants of the consumer.

 

[expletive]

Software is indeed missing from the analysis. Now, Sony has two main strengths here, their own franchises like the GT series, and all the best selling 3rd party games like MGS, FF and so on from the previous two generations of the Playstation. It's a safe bet that they'll be able to capitalize on the first with the PS3 as well.

However, developers and publishers of the big 3rd party franchises may have to face a tough decision in the late 2006/ early 2007 timeframe. At this time, if all goes well for Microsoft, there may be 8 to 15 million Xbox360s sold; whereas Sony may still be under 5 million, maybe even 3 million, if they would indeed start in the US and Europe in late 2006. (Note the two "if"s before you start to reply ). These figures are primarily based on manufacturing potential; MS indicated that they should be able to produce 4-5 million Xboxes in 6 months, so their advantage could be anywhere from 5 to 10 million units. Thus, any game released at this time would have as much as twice the market and the sales potential on the Xbox, compared to the PS3. This is very important if you consider nextgen development budgets.

There are of course many other factors that have to be considered here by the publishers. Their costumers may be loyal to the Playstation brand and releasing a FF game on the Xbox could turn into a financial disaster. Betraying Sony in such a way could also have consequences. It's also safe to assume that PS3 will sell very well from mid 2007 and reach a very large user base by 2008.
On the other hand, if the market actually turns out to be that way, then there would be a huge potential for the first (few) big franchises released on the Xbox. We do not yet know all the X360 games in development, but it's a safe bet that most of them are from the same devs and franchises that we know from the first Xbox - so there's certainly room for well-known names. For all we know, these studios might already be watching each others' moves... and who knows how many would follow, if one decides to go for it.
And for all the politics and fan expectations, next gen development is still heavily driven by money. 10-20-50 million dollar projects won't break even with sales under a million copies, and both studios and publishers are driven by businessmen, who probably care more about the math and the balance sheet.

So, in my opinion, software will be the most important factor with this gen as well; but a larger installed base in 2006/2007 may give MS an advantage in that field as well.

This is a great post. However, I cant imagine such a disparity in the sales though that you depict here. If by the end of 2006 the 360 has 3x the number of installed units of the PS3, i think the momentum for developers to jump on board could be tremendous. FOr some reason i just cant imagine a world where come Jan 2007 theres 12 million 360s and only 4 million ps3s sold. I'm pretty sure Microsoft would sign for that right now.

EDIT: I think its important to point out that the xbox now has franchises of its own that will make a splash. I feel like we're still treating the 360 like there was nothing from last gen to capitalize on. I think Halo may be as big, if not bigger, than GTA as far as videogame franshises go. If the movie is any good it will surpass frnachise and move into 'pop culture' status imo.

 

[Edge]

My statement was that if the 360 ends up being half the price of the PS3 by holiday 2006 and there is not a discernible difference in quality or franchises to the consumer, that it will affect sales. How much or whether or not it will win the 'console war' i dont know.

That's just silly. There is no way in the world Xbox 360 will be half the price of the PS3 by Christmas 2006. If MS was that concerned about pricing their console that low, they would have priced the current Xbox lower than the PS2. It's not just the cost of the console that determines it's price, as almost all consoles when entering the market are sold at a loss.

 

[Edge]

obviously that's oversimplifying it. The game library is what really matters, but when you take a better or equivalent game library(which GC never had) then add a lower price, then it's a recipe for success.

Success? 5 billion in loses still have to be made up from the first generation, and the second generation Sony has a more competitive console performance wise, when they were totally outclassed the first generation. Sony has not closed the gap, they have surpassed MS in power, and so will be harder to compete against this time, then they were the last round.

Sony is making PROFIT now, all the while playing for multi-billion dollar factories for the PS3. All thanks to the massive profits being made off of the PS2, which is the dominant console in all markets, even against superior hardware, and against a console like the Xbox which has a great gaming library.

 

[Mythos]

My statement was that if the 360 ends up being half the price of the PS3 by holiday 2006 and there is not a discernible difference in quality or franchises to the consumer, that it will affect sales. How much or whether or not it will win the 'console war' i dont know.

You assume that the added PS3 features are all items on every consumers checklist and the fact is theyre not. A lot of consumers wont care about a cell processor bluray drive or 2 HDMI ports. "Worth paying for" is not based on the sum of the parts, its based on the wants of the consumer.

However, bluray can become that X factor in the next gen cosole race. If we look at the History of the PS brand we can see Ps1-cd, PS2-DVD, and possbly PS3-bluray.

 

[expletive]

Expletive well I don't know - I mean is it the norm for an analysis to have access to the BOM for products that haven't even lauched yet? And for that BOM to contain price quotes for components that in some cases don't exist yet? I mean I am *certain* that their numbers are based on something, I have no doubt. And that there was a logical process followed in reaching them.

Certainly I know it always takes financial firms a while to get the BOM with regard to Apple's iPods, something they're always after, and to even predict what new iPod models might be in the pipe - their main source often being fan sites. So I don't think it's outrageous to accuse ML of creating numbers based on facts, but that the numbers themselves do not necesarilly reflect a hard and fast reality.

I mean some of these numbers just don't make sense, that's all I know.

I'm hardly trying to bring an indictment though; I wouldn't expect any other firm's numbers to be any more accurate at this point.

If the PS3 is going into manufacturing in 2-3 months and theres some components that dont even exist theyre in trouble dont you think? Now yes there may not actually be an RSX in existence but based on the data they have, they know what they will cost (based on yields).

There has been reports on the cost of these consoles for awhile now and to be honest i have no idea what theyve ACTUALLY seen. However, i do know this, after the tech 'bubble burst' and ENRON, these fortune 500s, especially the financial institutions, are extremely cogniscent of everything they publish and that they can back it up with due diligence and facts. This analysis is based on facts. And the analysis is done in such a way to draw the most possible outcome, no other way. These analysts being "right" is how these large firms gain prestige, credibility, and mindshare.

So whether or not they actually end up being right about the pricing, my feeling is that they are way more likely to be correct than any of us and that the 'half the price' quote could very well be a reality.

I cant remember but there was another developer who talked about Microsofts "aggressive plans to grow their market share in 2006". Does anyone remember who said that? A $100 price drop in 12 months seems to fit into that as well.

 

[expletive]

However, bluray can become that X factor in the next gen cosole race. If we look at the History of the PS brand we can see Ps1-cd, PS2-DVD, and possbly PS3-bluray.

Yes but this discussion is in the context of late 2006. BR becoming a factor at some point is a distinct possibility but during the middle of an optical format war (holiday 2006) i think its far less likely that consumers will pay extra just to have it. At best, it will probably be 4th on their list of reasons to buy a PS3.

 

[Mythos]

Yes but this discussion is in the context of late 2006. BR becoming a factor at some point is a distinct possibility but during the middle of an optical format war (holiday 2006) i think its far less likely that consumers will pay extra just to have it. At best, it will probably be 4th on their list of reasons to buy a PS3.

That's the beauty with blu-ray...Not only will it help promote itself it helps promote the PS3. And what Chap doesn't want the ablity to play HD movies....

 

[blakjedi]

Oh and the PS3 is not? Of course Sony can implement 65nm tech in the PS3 in 2007 right?

Your barking up the wrong tree here mckmass. I was responding to Vince's charge that only Sony will be able to consolidate IC's effectively over the next few years when in fact MS' goal is to aggressively do so.

Please pay attention to the flow of the thread.

Vince: Instead of the back and forth I will just say the future will bear out your contentions. Many times I have heard XBD state that OTSS fabs are the cats ass but meh... I think IBMs and TSMC fabs are probabaly the cats ass also and can keep up with whatever OTSS can do...

Again we'll see... Enjoy!

 

[Azrael]

Admittedly I didn't read the whole 8 page thread, but the first 3 pages of it seems to be Sony ******s tripping over each other in an attempt to damage control (any) good news about the 360. It's quite pathetic really.

I find that this is what Microsoft goal was from the beginning. They weren't really concerned with getting the most powerful hardware (and still may have gotten it anyway), just the most cost effective hardware in preparation for a price war later, and releasing it first to gain a user-base. They paid close attention to the PS2 last generation and took cues from it's success. I will also argue that they have made strides, by giving the 360 a more streamlined conventional architecture and better development tools.

It will be interesting to see how this turns out. Sony has already admitted that the PS3 will be expensive and with rumors of development difficulties and high development costs, there are clues that things may not be all that peachy in PS3 land. Changing the hardware design mid-stream may be affecting their production cycle; increasing costs and making the hardware more cumbersome to develop for. This could be similar to what happened with Sega when they changed the Saturn design in attempt to compete with the upcoming Playstation. Some people think that Sony is infallible but that is far from reality.

If Microsoft makes good decisions and Sony makes mistakes, next gen could very well leave Sony trailing by a wide margin. The vast majority of developers are fickle and will abandon any ship that begins to affect their bottomlines. Sony by name will not ensure next gen hardware sales. We have only to look at the history of Sega and Nintendo to know this.

 

[Johnny Awesome]

Well, just a small correction - it's publishers that are fickle. They'll go where the userbase is.

The Merryl Lynch numbers are probably a little high across the board, but it wouldn't surprise me that a CPU that is 40% larger would be 60% more expensive due to defects following a power law.

Higher costs are worse for Sony this time around, because MS has more mindshare and can take advantage of a price war more easily. Unlike last time around, most of my casual gaming friends are 50/50 on X360/PS3, whereas most went PS3 last time. Pricing could be pretty crucial in the long run.

 

[expletive]

That's just silly. There is no way in the world Xbox 360 will be half the price of the PS3 by Christmas 2006. If MS was that concerned about pricing their console that low, they would have priced the current Xbox lower than the PS2. It's not just the cost of the console that determines it's price, as almost all consoles when entering the market are sold at a loss.

Take it up with Merrill. I just said if its true it will matter.

I think everyone pretty much expected the 360 core to be at least $249 by next year, i dont think $199 is such a stretch. I have no idea what the PS3 will have no inkling what the PS3 will sell for at the end of 2006 since we really dont even know what its launching at but i'm pretty sure they wont want to sell it at 299 if they need to in order to compete on price.

 

[expletive]

That's the beauty with blu-ray...Not only will it help promote itself it helps promote the PS3. And what Chap doesn't want the ablity to play HD movies....

I think in 2006, for most people that buy the PS3, BR will be a 'nice to have', nothing more.

 

[seismologist]

Even if say the 360 is $100 less since I believe it the biggest price difference we'll see. It's not likely going to matter. Sony will sell as many PS3's that they can ship through the end of 2006.