The PS5’s production cost is roughly $450 per unit, according to Bloomberg, with the supply of DRAM and NAND flash memory largely to blame for their high demand in other products. Bloomberg also said Sony already removed features from its new PS5 camera because of this issue, and this could play a role in why Sony hasn’t decided on a final price for the system. Sony suggested it’s waiting to see how the Xbox Series X is priced before it makes a decision.
If accurate, this production cost means the PS5 will likely sell for $500 at launch. The Xbox Series X appears to have a similar cost, according to industry analyst Daniel Ahmad. Ahmad estimated Microsoft’s system costs between $460 and $520 to produce, meaning Microsoft could have an even smaller profit margin if it prices the Series X at $500. In fact, it could have no profit margin at all.
Also I want to clarify one point from the original tweet. I’m not saying that XSX build cost is $460.
I estimated that the build cost would be in the $460 minimum to $520 maximum range based on current component costs.
To simplify it, higher than the PS5 build cost somewhat.
— Daniel Ahmad (@ZhugeEX) February 14, 2020
Loss-leading — selling a new product below its production cost in order to generate interest — is common among past game consoles, and Sony and Microsoft will want to keep their systems competitive with each other. In the current generation, Microsoft priced the Xbox One at $500 because it bundled every system with Kinect, while Sony didn’t include the PlayStation Camera and kept the price at $400. That gave the PlayStation 4 an early lead that it never lost, dominating the Xbox in sales.
It was a lesson learned from the previous generation when Sony set the PS3 at $499 and $599 after the Xbox 360 already released a year earlier. The PS3 would ultimately take several years before it was able to overtake lifetime sales of the Xbox 360.
While $500 would be expensive for the two new consoles, both are packing a great deal of power into the hardware. On top of 8K resolution, both systems will support ray tracing, a feature currently limited to powerful PCs. They’ll also be backward compatible, so players can sell or trade in their old console to make dropping half a grand on a new game system a little easier on the wallet.
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