What is the true cost of manufacturing the PLAYSTATION 3?

[Carl B]

Eh? SCEI still has 2 rather large fabs (one of which is fabbing the RSX). IBM (and perhaps Chartered) will likely provide the bulk of the initial Cells, however I wouldn't be too surprised if OTSS and/or SCEI take over the bulk of the 65nm node production...

Weren't those fabs rolled into the semiconductor division when Sony got re-orged?

My contention is not that Nagasaki and OTSS aren't doing the heavy lifting in terms of fab work - or that Sony lacks fab capacity if that's what you felt I meant. My contention is that the investment in these facilities is shown on the books of Sony Semi rather than SCE. SCE pays a price for the chips sourced from Sony Semi, to be sure, but the billions in build-out isn't being counted against the Playstation divisions earnings. The loss SCE is estimating for the year is sans fab investment.

EDIT: C'mon Archie get with the times! The fab transfer was even before the formal re-org!

In July 2004, in order to establish a more efficient
and coordinated semiconductor supply structure, Sony group has
integrated its semiconductor manufacturing business by
transferring Sony Computer Entertainment's semiconductor
manufacturing operation from the Game segment to the Electronics
segment. As a result of this transfer, sales revenue and
expenditures associated with this operation are now recorded
within the "Semiconductor" category in the Electronics segment.
The results for the three months ended June 30, 2004 have not
been restated as such comparable figures cannot be practically
obtained given that it was not operated as a separate line of
business within the Game segment. This integration of the
semiconductor manufacturing businesses is a part of Sony's
semiconductor strategy of utilizing semiconductor technologies
and manufacturing equipment originally developed or designed for
the Game business within the Sony group as a whole.

Anyway here's a link to a slide show from a little while back of Sony Semi's division goals. Nothing thrilling, but always enjoyable to see laid out. Of note is that late last year they were still viewing Cell as a core IC for CE devices, so hopefully we'll begin to see some use of the chip in that space soon.

 

[archie4oz]

EDIT: C'mon Archie get with the times! The fab transfer was even before the formal re-org

Sigh... I love being lectured about my own overlords about stuff I've already mentioned/posted/etc before you were even registered...

Weren't those fabs rolled into the semiconductor division when Sony got re-orged?

Yes and no. There is no "semiconductor division". There are several semiconductor companies (all of which fall under SEL (or at least most of them)). Formalized integration started a year before the date you mentioned when SSNC was formed. The integration with SCK was largely a formality since SCEI was integrated as a wholly owned subsidiary a month before, and SCEI's Fab1 and Fab2 were already collaborating on various ICs (e.g. WEGA engine ICs, CMOS sensors, etc.) with SCK (The facilities at Isahaya had already been there since the late 80's, SCEI's fabs were built on an existing compound). The name of the facility is different now, and some aspects of financial reporting and HR issues are different, but the personnel are the same, the day to day operations are the same, the roadmaps are the same, and for all intensive purposes folks still consider (and tend to call them) SCE Fabs.

My contention is that the investment in these facilities is shown on the books of Sony Semi rather than SCE.

Costs will actually be shared between SCK and SCE.

 

[Carl B]

Sigh... I love being lectured about my own overlords about stuff I've already mentioned/posted/etc before you were even registered...

Well if it came off that way, I can assure you I didn't mean it to. You were the one essentially wondering about whether I was aware of Sony's fab capacity remember, and that is a topic on which I've made my awareness known through probably hundreds of posts here... and since we've both been members.

You can no more expect me to have read your history of posting than I can expect you to have read mine.

For my part, I'm sorry about the perceived lecture. You'll have to understand that that's not how I meant it to come across though.

Yes and no. There is no "semiconductor division". There are several semiconductor companies (all of which fall under SEL (or at least most of them)). Formalized integration started a year before the date you mentioned when SSNC was formed. The integration with SCK was largely a formality since SCEI was integrated as a wholly owned subsidiary a month before, and SCEI's Fab1 and Fab2 were already collaborating on various ICs (e.g. WEGA engine ICs, CMOS sensors, etc.) with SCK (The facilities at Isahaya had already been there since the late 80's, SCEI's fabs were built on an existing compound). The name of the facility is different now, and some aspects of financial reporting and HR issues are different, but the personnel are the same, the day to day operations are the same, the roadmaps are the same, and for all intensive purposes folks still consider (and tend to call them) SCE Fabs.

Archie you'll forgive my ignorance but I'm not sure to what extent I follow you here. It has to be more than just a 'few' aspects of the financial reporting that are different, because looking through the financials, it seems to me that the semiconductor segment is absorbing all the plant and equipment outlay. I mean it's all well and good that 'folks still consider them SCE fabs,' but for the purposes of where the costs are booked and what division they belong to, they are not SCE fabs - which is our concern in this thread afterall.

I have the maximum respect for your industry knowledge, but at the same time, if SCE is picking up some of the tab for building out the East Fishkill annex, the Nagasaki 65nm upgrade, or any of the rest of it, I'd like to know how or why that is. I'm not talking about R&D here remember, simply plant and equipment expenditures related to semiconductor fabbing.

 

[archie4oz]

I have the maximum respect for your industry knowledge, but at the same time, if SCE is picking up some of the tab for building out the East Fishkill annex, the Nagasaki 65nm upgrade, or any of the rest of it, I'd like to know how or why that is. I'm not talking about R&D here remember, simply plant and equipment expenditures related to semiconductor fabbing.

The expenditures fall under Sony Corp. Funding of that scale has to approved by the board/senior management. SCK deals mainly deals with day to day operations and maintenance and process R&D and some of the outlay. East Fishkill funding would be from Sony Corp. The 65nm node outlay expenditures for Nagasaki were from SCEI (this also before the integration of SCEI with Sony Corp. as well), before the official integration of SCEI semiconductor operations with SCK. The bulk of the funding that drives fab upgrades comes from SCEI's initiatives. Now that may change in the future as organizational changes sink in (e.g. instead of SCEI funding semiconductor development, SCK funds it at the behest of SCEI).

In anycase, the financial statements and org charts don't really paint the full (or necessarily accurate picture). I've sat through 4 years of constant re-org, and in reality the organizational hierarchy resembles nothing like what the publicly available org charts illustrate except at the most superficial level. Not a whole lot changes for most of us (except for some extreme examples), despite what the PR and 10K/Annuals report...

 

[Carl B]

The expenditures fall under Sony Corp. Funding of that scale has to approved by the board/senior management. SCK deals mainly deals with day to day operations and maintenance and process R&D and some of the outlay. East Fishkill funding would be from Sony Corp. The 65nm node outlay expenditures for Nagasaki were from SCEI (this also before the integration of SCEI with Sony Corp. as well), before the official integration of SCEI semiconductor operations with SCK. The bulk of the funding that drives fab upgrades comes from SCEI's initiatives. Now that may change in the future as organizational changes sink in (e.g. instead of SCEI funding semiconductor development, SCK funds it at the behest of SCEI).

In anycase, the financial statements and org charts don't really paint the full (or necessarily accurate picture). I've sat through 4 years of constant re-org, and in reality the organizational hierarchy resembles nothing like what the publicly available org charts illustrate except at the most superficial level. Not a whole lot changes for most of us (except for some extreme examples), despite what the PR and 10K/Annuals report...

Well I think you and I are still talking about two different things though. I'm not speaking to how the semiconductor division is run, or who runs it. Or where expenditures were in the past or where initiatives originated. I understand that a lot of this is rooted in SCE, and until recently Kutaragi was head of both divisions anyway.

All I'm saying though, is that all of that aside, when SCE is predicting a net loss for the current fiscal year of around $900 million, that that loss for the most part excludes plant and equipment expenditure on fabs, because those outlays are accounted for elsewhere.

Essentially this whole tangent began because I said that with the expected losses, PS3 manufacture could certainly notbe break-even or better, to which Fox5 responded by saying that I should take any expenditure on fabs this year into account, to which I replied that those expenditures are not a part of that predicted loss on SCE's books. And then we started our thing here.

Ultimately what I'm wondering is whether you disagree with my statement that the predicted ~$900 million loss for SCE this year likely does not include fab expenditure and build-out, or whether you agree that those outlays are probably accounted for elsewhere in the Sony group.

Because we're talking about a lot of money here, and it would have a very material effect on any production estimates reached here if SCE was footing fab equipment costs this year. For my part, I'm saying that those costs are accounted for elsewhere.

 

[zed]

i cant believe all the estimates of over $200 for the blu-ray drive (are ppl including r+d? perhaps, this is not part of manufacturing)
i'ld say under $100

 

[dubyateeeff]

While most estimates IMO are rather high, the $40 one is absurdly low. Just a couple of years ago 405nm blue laser diodes were upwards of several thousand dollars a pop, and were only available from Nichia (which Sony has a tight partnership with) and Cree... Granted those prices have dropped staggeringly each quarter, but $40 is just ridiculous...

40$ because Sony picks quantity over quailty.

So why are BR-players so expensive?

No, one is buying them! I haven't seen any of the "rich" guys in the channel even mentioning that they have one (maybe because there is basicly nothing to watch on it).

Because changing "DVD" plant into a "BR" plant and sell selling one for 100$ right now doesn't make you money, you need to sell them for a ridiculous high price and they will fall quickly when mass production begins, but that is what we are talking about.

They need to recoupe their investments in plants and R&D so there is an added cost.

 

[EndR]

AFAIK or at least what I have read so far, is that BD in PS3 has a cost in from 200-300 bucks. I saw an article about it, gotta search forit and I´ll edit this post when I find it..

EDIT..
Well, I found the source.. but I was wrong in my numbers..

From a video entertainment perspective, Sony's strategy is bold. The Blu-ray drive alone is responsible for the majority of the price gap between the Xbox 360 and the PS3. Wolfgang Schlichting, an analyst with IDC, believes that the cost of the PS3's Blu-ray drive is around US$200-300 per unit, while Merrill Lynch put the cost at US$350. My own contacts in manufacturing believe that the Lynch estimate is too high, but no one believes that the entire Blu-ray drive mechanism can be had for less than US$200 right now.

http://arstechnica.com/articles/paedia/hardware/PS3-gamble.ars

 

[Almasy]

40$ because Sony picks quantity over quailty.

So why are BR-players so expensive?

No, one is buying them! I haven't seen any of the "rich" guys in the channel even mentioning that they have one (maybe because there is basicly nothing to watch on it).

First, given the wide industry Blu Ray support, I doubt there´s nothing to watch on it. Second, IIRC, Blu Ray hasn´t even launched yet, so it´d be understandable if no one has what can´t be bought yet.

 

[Fox5]

First, given the wide industry Blu Ray support, I doubt there´s nothing to watch on it. Second, IIRC, Blu Ray hasn´t even launched yet, so it´d be understandable if no one has what can´t be bought yet.

You can buy blu ray drives right now, but I do not believe there is any software for it yet, just rewritable media.