Game console manufacturers are always in a precarious position at launch. The hardware will commonly be sold at a loss, and the platform holder must depend on software sales to make that cash back. It was especially bad with the launch of the Xbox 360 and PS3, nevertheless it appears like Sony has reigned in its costs for this latest generation of consoles.

IHS reports in its latest teardown that the components that make up the PS4 only costs $372. Once you consider manufacturing costs, the overall cost of the console jumps to $381. The console is sold for $399 at retail so that you would assume that Sony is making a living on each console sold. That’s not the case, however, as IHS points out plenty of other costs will be sure that Sony takes a loss on each console sold on the outset. Fortunately for Sony, the low-cost of the console also ensures that it’ll break even or maybe earn a living later down the road, unlike the PS3.

“This time, Sony is on a greatly shortened route to the hardware break-even point, or maybe profitability, with its cost-conscious PlayStation 4 design,” said Andrew Rassweiler, senior director, cost benchmarking services for IHS. “The company is pulling off this feat, despite offering a brand-new design that after again includes avant-garde components that yield superfast performance. The PlayStation 4 keeps a lid on costs by focusing all of the additional expense at the processor and memory—and reducing outlays for the optical drive, the hard drive (HDD) and other subsystems.”

Interestingly enough, the teardown reveals that the PS4′s CPU and DRAM make up slightly greater than half the complete cost of the console at $188. Compared, the PS3′s CPU and DRAM only made up 29 percent of the entire cost of the console.

“Sony clearly has made the call to spotlight balancing the brains and economics of the console, with the processor and memory dominating both the design and the BOM,” said Jordan Selburn, senior principal analyst for consumer platforms at IHS. “This processor is a monster, with the skin area of the chip amounting to about 350 square millimeters. It is thrice larger than the other chip manufactured using equivalent-process technology that have been examined by the IHS Teardown Analysis service. Despite the remarkable silicon acreage of this device, it comes at a cost point attractive to mainstream consumers while delivering a really high level of performance. Future versions, manufactured with much more advanced semiconductor processing technology, will further enhance both cost and function.”

Speaking of DRAM, IHS also notes that Sony’s use of GDDR5 RAM inside the PS4 has resulted in the dramatic increase of cost of RAM in comparison with the PS3. Not just is Sony’s new console using 16 times the RAM of its predecessor, but it’s also using leading edge technology when compared with the DDR3 RAM that’s utilized in the Xbox 360, PS3 and Xbox One.

Despite these increase in costs for the CPU/GPU and RAM, IHS says that Sony was capable of make a variety of cost cutting measures in other parts of the console. For one, the Blu-ray drive within the PS4 only costs $28, in comparison to $66 within the PS3. Sony was also ready to get monetary savings at the motherboard by “using a more integrated design” that reduced “the variety of small-sized integrated circuits, discrete semiconductors and passive components.”

You can see a whole breakdown of components below:

[h/t: Polygon]
[Image: IHS]