Second-Generation PlayStation 3 Features Cost Reduction, Supplier Shifts
Sony Corp.'s new-generation PlayStation 3 (PS3) features a cost-reduced design due to integration and some key changes in components from the previous-generation model, according to a teardown conducted by iSuppli Corp.
Context & Ripple Effects
iSuppli's teardown of the second-generation PS3 lands a year after Sony's 40GB redesign and the price cut that lifted PlayStation 3 sales, following earlier speculation that a cut was coming as the console trailed Nintendo's Wii. It also extends a teardown lineage: iSuppli had already dissected the original PS3 in its December teardown, making this revision a direct before-and-after read on Sony's cost engineering. The pattern echoes what Sony did with the PS2, where a low-price 'compact' model kept the platform commercially alive late in its life.
First-order effects
- Sony's bill-of-materials on each new-generation PS3 falls through component integration and supplier swaps, directly improving (or at least protecting) per-unit margins at the console's current retail price.
- Suppliers displaced from the second-generation design lose high-volume socket share overnight, while the winning component vendors gain a multi-year anchor position in one of gaming's flagship platforms.
Second-order effects
- A cheaper-to-build PS3 gives Sony headroom for further price cuts against the Wii — the lever that previously moved units — forcing Microsoft and Nintendo to weigh their own cost-downs or bundle responses.
- Component suppliers now face pressure to offer dual-sourcing and aggressive pricing to stay designed-in, since Sony has demonstrated willingness to re-source between hardware generations.
Third-order effects
- If the pattern holds, console economics shift from launch-loss-leadership toward iterative hardware revisions that chase profitability mid-cycle — a playbook later visible when the PS4 launched within $18 of its build cost.
- Teardown firms like iSuppli become de facto arbiters of competitive strategy, as their published cost analyses effectively signal to markets which vendors can afford the next price move.
The trend: Console makers are converging on continuous cost-engineering cycles — integration, re-sourcing, and mid-generation redesigns — as the primary weapon in a price-driven battle for living-room share.