Sony wont take big hit from PS4 launch, unlike PS3

Sony won’t take a “big hit” launching PS4 like it did when it released PS3 in 2006, according to chief financial officer Masaru Kato. The executive said back in 2011 that the company wouldn’t repeat the costly process that saw it create the Cell processor and its own semi conductor facilities for PS3, and yesterday he told investors of the benefits of adopting third party components and production capabilities for its upcoming console.

"One thing I can say for the new platform, PS4, how it is different from past platforms, is that the amount of investment that goes into the basic architecture components [for the] hardware device is much lighter than the past platform," he said. "To be a little more specific, when we launched PS3, initially we had a negative margin on each unit that we sold which was quite big. It did come down over time as we reduced the cost of the console, however the initial investment was quite big due to the fact that we had to design the Cell chipset from scratch which cost a lot of money, hundreds of millions of dollars.

"In addition to that, we had to invest money developing the silicon conductor fabrication technology, as well as the capital expenditures for producing the chipset. All of these amounted to billions of dollars of investment for the platform which had to be recouped as we sold software and hardware. Compared to that business model, PS4 utilises a core chipset. Yes, we have designed it with our own technology, but the core of the CPU is something that's available ready, so we're not designing the chipset from the ground up.

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"In addition to that, [for] semiconductor processor technology [and] fabrication process technology we are relying on outside sources. [For] production capacity, also we are relying on outside sources, which means that we don't spend our own money to get the chipset ready. That, I think, is the fundamental difference in the business model this time and the reason for us not taking a big hit in the initial year of the introduction of the PS4."

Kato was speaking to investors and analysts following the publication of Sony’s annual financial results yesterday. While the wider company managed to swing to a profit for the first time in half a decade, Sony’s PlayStation division posted a notable decline in sales and operating income.