Merrill Lynch's Next-Gen console prediction
- Thread starter mckmas8808
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Phil said:I wasn't refering to the product price dropping quicker, I was refering to costs (hence why I mentioned them owning their own fabs being a factor as to how they will gain an advantage in the long run).
There's both cost and risk involved in owning your own fabs. Fabs are expensive so you'd want to utilize them close to 100%. But not more! If demand outstrips supply you have to either lose money (or rather, not earn them) or build a new fab (which is expensive).
Buying your chips at foundries reduces this risk (since they have multiple fabs). And with the amount of business MS is placing, I'm sure they have excellent contracts in place.
Cheers
Gubbi
Gubbi,
I am aware of that, I'm sure, Sony is as well. I trust that if Sony could get better deals from other vendors, they would. The situation with the PS2 and PStwo has showed however that it obviously worked better for them to go there with PS3 / PSP again as well.
Just about anything can be a risk - yet it's up to the company to make the right risks and play off their potential of turning into an advantage. Sony's in the best position to know what their fabs can handle, how much they cost is involved and all other internal factors as well. What they can't predict is the market and how they will buy their products.
It's always a gamble, but noting their experience in the past, I'm sure they've accounted for potential risks.
I also have no doubt that Microsofts has made excellent deals with their partners - yet, you have to factor in that Sony is expecting similar sales of PS3 as what they've accomplished with PS2 (100 million units within 5/6 years?). How much is Microsoft expecting? Realistically, not anywhere near as much - a mix between being conservative (20 million after 3 years ) to optimistic (30 million in 3 years). These predictions and expectations determine deals as well. In the end though, I am sure that Sony could get better deals from the same vendors than Microsoft based on the fact that they're expecting a higher success rate than any of their competitiors (and realistically, so would be their potential vendors). Since they are continueing staying with their internal fabs, I take it they can achieve a significant advantage that would warrant this strategy - basically along the lines:
[ fixed costs of fab + variable costs of production * x units ] < [ fixed costs * x units from vendors ]
disclaimer: just a primitive equation of course - what's not included obviously is that Sony can use that fab for various products as noted further above.
I am aware of that, I'm sure, Sony is as well. I trust that if Sony could get better deals from other vendors, they would. The situation with the PS2 and PStwo has showed however that it obviously worked better for them to go there with PS3 / PSP again as well.
Just about anything can be a risk - yet it's up to the company to make the right risks and play off their potential of turning into an advantage. Sony's in the best position to know what their fabs can handle, how much they cost is involved and all other internal factors as well. What they can't predict is the market and how they will buy their products.
It's always a gamble, but noting their experience in the past, I'm sure they've accounted for potential risks.
I also have no doubt that Microsofts has made excellent deals with their partners - yet, you have to factor in that Sony is expecting similar sales of PS3 as what they've accomplished with PS2 (100 million units within 5/6 years?). How much is Microsoft expecting? Realistically, not anywhere near as much - a mix between being conservative (20 million after 3 years ) to optimistic (30 million in 3 years). These predictions and expectations determine deals as well. In the end though, I am sure that Sony could get better deals from the same vendors than Microsoft based on the fact that they're expecting a higher success rate than any of their competitiors (and realistically, so would be their potential vendors). Since they are continueing staying with their internal fabs, I take it they can achieve a significant advantage that would warrant this strategy - basically along the lines:
[ fixed costs of fab + variable costs of production * x units ] < [ fixed costs * x units from vendors ]
disclaimer: just a primitive equation of course - what's not included obviously is that Sony can use that fab for various products as noted further above.
Phil said:
Going by your logic, the PS2 should be much cheaper than the Gamecube to manufacture. Since it's manufactured in-house and has sold 5 times more than the GC. But that's simply not the case. The GC had better hardware, sold 1/5 the amount as PS2 and was still much cheaper.
There are several factors that go into how cheap a console is to manufacture, we simply do not have all the details to make such a call yet.
Hardknock,
I thought it was obvious that I was comparing two products with very similar transistor budgets and not, as you are expecting, a product from 2000 on process x with a product from 2001 on process y with different transistor budgets etc. If you use the search function though, I'm sure you'll come across to a discussion on the costs of PStwo vs. GameCube and that they may be quite similar if not to a slight advantage in PStwo's favour.
I thought it was obvious that I was comparing two products with very similar transistor budgets and not, as you are expecting, a product from 2000 on process x with a product from 2001 on process y with different transistor budgets etc. If you use the search function though, I'm sure you'll come across to a discussion on the costs of PStwo vs. GameCube and that they may be quite similar if not to a slight advantage in PStwo's favour.
Hardknock said:Going by your logic, the PS2 should be much cheaper than the Gamecube to manufacture. Since it's manufactured in-house and has sold 5 times more than the GC. But that's simply not the case. The GC had better hardware, sold 1/5 the amount as PS2 and was still much cheaper.
Uhm and you know that how? Also, "much cheaper"? Err...
Hardknock said:
Are you going to add anything substantial or just your own views on things you know nothing about?london-boy said:
Here's the thing, this is a message board filled with difference opinions. If you don't agree with what I said, show/explain where I'm wrong. Don't just respond with "Err..." A RESPONSE LIKE THAT SERVES NO PURPOSE. I don't claim to be 100% correct 100% of the time, if I'm wrong please let me know where so I can learn, thanks.
Hardknock said:
Don't you go around telling people how to post. This costs thing has been discussed many times before, and it was shown that PS2 and GC have been manufactured for the same cost (more or less depending on the source, many believe that PStwo is actually cheaper than GC to produce) for years now. That's why i went "err..."
The fact that PS2 still costs more in the shops has nothing to do with how much it costs to produce.
Happy now with the "full response"? This has all been discussed before.
london-boy said:
You sure have an attitude this morning. But anyway, you say it's been "shown". Can you provide a link to this? Otherwise I find that very hard to believe. All signs point to GC being significantly cheaper. If you want to listen to "armchair analysts" on a forum with no proof that's fine. But don't go acting like your opinion is fact and my hypothesis is ridiculous when you have no facts to back up either claim in the first place. Thank you.
Hardknock said:
Couldn't i say the same about you?
At least i'm not the one who's been completely one-sided on any discussion we've ever had.
What "signs" point to GC being "significantly cheaper" than PS2, if i may ask?
Because if anything, the "signs" are that PS2 (or PStwo) should be cheaper, (1) the EE and GS is one chip now at 90nm and has been for ages, compared to the 2 chip (Flipper+Gekko at a bigger manufacturing process, making the chips bigger than using 90nm process) solution of GC, therefore cheaper, (2) Sony's making the whole thing in house without many external clients to pay, (3) PS2 is older technology, (4) PS2 has sold 5 times as much as GC and keeps outselling it by god knows what margin, therofre economies of scale would dictate PS2 should be cheaper anyway.
They are either equal or PStwo is cheaper, according to those "signs". Now if you have other "signs", i'd love to see them.
As i said, the fact that PS2 is more expensive in the shops has absolutely nothing to do with how much it costs to manufacture. It just means that Sony can sell it at that price, because people keep buying the bloody thing!! PS2 was even more expensive (in the shops) than Xbox at one point, and today i think they sell for the same price, that in no way means that PS2 costs more (or the same) to manufacture than Xbox.
I wonder how applicable this "multiple fabs" horizontal model is to the real-world Xbox 360 production. AFAIK, it's said that the horizontal model is good for many kinds / small production, and the vertical model is good for less kinds / mass production, in terms of the cost. The horizontal fabless model is also resistant to a natural disaster such as earthquake.Gubbi said:
For CPU, they use IBM 90nm SOI process so they can't move it from IBM and Chartered. For GPU, the daughter-die can't be moved from NEC so if it's stalled the assembly for the final product would stop. For the GPU core manufactured at TSMC, can they add second sources easily enough?
I didn't say that owning a fab automatically equals lower costs. Actually, it should be more than obvious what advantage owning your own fab can have. As I explained further above, seeing PS2 & PSP production and PS3 to continue this trend, it's obviously cheaper for Sony as a whole.
If you disagree with this, please explain with what exactly and/or state why.
If you disagree with this, please explain with what exactly and/or state why.
nelg said:
No middle people to feed, for one.
Joe DeFuria
Legend
london-boy said:
There are pros and cons to being more vertically integrated. Nothing is automatic, otherwise ATI and nVidia would have their own fabs.
Joe DeFuria said:
Sure, i was just mentioning one of the advantages. Never said there are no disadvantages.