IHS Insight Perspective
Portable gaming is bigger than ever, though so much of it nowadays is taking place on smartphones, which eats away at Sony's potential market. Sony now is playing catch up, in some ways, by providing a game console that offers everything a smartphone does. The PlayStation Vita is one of those few products, like an iPhone, that also can sell millions of units in short period and already broke the 1.2 million unit mark within 2 months or so of release. Furthermore, Sony may not have as much room to make margin on the hardware as Apple does with iPhones (whose products have "implied" margins of ~50%) The implied margin here is only about 32%, but the real margin is thinner, as our analysis does not look at ALL costs - but just hardware costs and manufacturing. Having said that - this product stands to make more margin than the PS3 whose costs were, early in it's lifecycle, well in excess of retail prices.
Latest potable gaming offering from Sony brings AMOLED and capacitive touchscreens to the game (catching up with the smartphone experience). This device blurs the lines between previously discrete and separate markets and products. In fact, with 3G and WiFi functionality - one could argue this is a smartphone masquerading as a game console. Only time will tell if dedicated consoles like this have a future.
Sony shoots for a high-end gaming experience that borrows heavily from smartphone designs with this full blown feature set that includes 3G Connectivity, a 5" diagonal AMOLED with capacitive touchscreen, 4GB of built-in NAND Flash for storage (inciting buyers to upgrade the memory via memory card expansion), and WiFi/Bluetooth. Virtually everything one would expect from a smartphone is in this design including gyroscope, eCompass and accelerometer, sensors, which are key to a modern gaming experience as well.
The core of this design is a custom developed and fabbed chip for Sony (CXD5315GG) that features, per the specs, quad-core, ARM Cortex-A9 + 4Gb mobile DDR2. The chip itself has 4 die inside - 1 from Toshiba, we assume is the core processor, another from Samsung we assume to be 1Gb of video memory, and then there are 2x2Gb dies from Samsung. This chip is unique to Sony and the product and is one of the priciest components as well.
The PS Vita was initially launched in Japan and Asia, but at the time of writing (March 2012) is now available worldwide.
Pricing and Availability
$299 USD MSRP
At the time of writing (March 2012) the PS Vita can be purchased (WiFi only version) starting at $249 USD. The version torn down in this analysis (3G/WiFi) has an MSRP of $299.00. Sony has learned too that bundling may be a great way to elevate gross margins, though at launch they have a promotional bundle for only $299 USD.
Initial launch was rolled out region by region starting in December. It now appears to be available worldwide in mid-March 2012.
5,000,000 Total Units
2 Total Years
For the purposes of this teardown analysis, we have assumed an Annual Production Volume of 5000000 units and a Product Lidetime Volume of 2 years.
Teardown volume and production assumptions are primarily used for our cost analysis in terms of amortized NRE and tooling costs, especially for custom components specific to the model being analyzed (mechanical components especially). Unless assumed volumes are different by an order of magnitude, minor changes in volume (say 1 million vs. 2) rarely have a large net effect on our final analysis because of this.
The following is from IHS iSuppli's Consumer Electronics Platform Market Tracker and the "Media Tablets and Smartphones Eat Into Proprietary Handheld CE Devices" Consumer Platforms Q1 2012 Topical Report - Handheld Media Rendering Devices.
The handheld gaming market has been dominated by gaming giants Sony or Nintendo over about the last decade with their Sony PSP and Nintendo DS models. Microsoft is also entering the handheld gaming market, but not on a dedicated gaming "centric" device, but with the Windows 7 Phone being its mobile gaming platform. Sony has since too launched the Xperia Play phone that offers PlayStation controls. With Sony and Microsoft opting for adding a smartphone gaming platform is a clear indication that the two gaming giants foresee the potential of the rise in smartphone gaming taking away market share from dedicated handheld gaming platforms.
So how are the Nintendo 3DS and Sony's newly released PS Vita faring? During the first week on sale in Japan, the PS Vita sold 320,000 units. The second week sales were only 72,000 units sold. When Nintendo launched the 3DS back on February 26, 2011, a similar trend happed, but not quite as harsh with the 3DS selling 370,000 dropping to 210,000 over the first two weeks. This decline forced Nintendo to make an unusual and steep price cut on July 28, 2011 from $250 to only $169. The price cut in conjunction to the launch of some blockbuster titles such as, "Super Mario Land" and "Mario Kart" helped turn the fortunes of the 3DS around which has since increased sales.
IHS iSuppli forecasts that the handheld gaming market is not going anywhere yet with the current generation platforms from Sony and Nintendo, but the warning signs went up in 2011 as the casual gamer has started to migrate from dedicated gaming devices to tablets and smartphones. 2012 will likely be the first year that this migration has been seen to happen based on sales volume forecasts to come. IHS iSuppli has forecasted unit market share, OEM factory unit shipments, revenue and ASP for the proprietary handheld gaming devices by OEM by model below in Figure 4 and Table 2. Currently, IHS iSuppli foresees that the 3DS to carry the most growth; where Sony's future in the near term is dependent on how the PS Vita fares in the U.S. and Europe upon launch this February. Unit shipments and revenues for dedicated handheld gaming platforms are expected to start decreasing in 2014 as the 3DS and PS Vita mature. However, IHS iSuppli will be watching this market closely in comparison to media tablets and smartphones, and will adjust accordingly.'
Hardware adoption of handhelds is, of course, partly determined by the release or popularity of certain video game titles - but because handhelds have become more than just gaming devices, it is equally important that devices integrate various online and multimedia functions. Current-generation handhelds widen the overall customer base by allowing users not just to play popular games, but also to access multimedia content and perform multiple functions while on the go.
IHS iSuppli believes this is the primary reason why the handheld gaming segment is losing market share to smartphones and tablets whom also offer a surplus of casual games, with some being free or just costing a few bucks. However, the mobile market changes even faster than the PC market. For example, if a consumer uses their iPhone as a gaming device and they want their next phone to be a Droid, that consumer loses all of their games. There can also be compatibility issues between different Android operating systems and different iPhone models. These very issues can cause gamers to shy away from their cell phone as their handheld gaming choice. To a dedicated gamer, buttons are essential, but the market of smartphones with buttons will likely not grow large enough to be anything more than another niche market. Also, children make a large part of the handheld gaming market, which has seen more kids getting iPads, but the norm is for them to not get expensive smartphones. So until Apple and Google can tap into that market, handheld consoles will continue to secure the niche handheld gaming market.
Media tablets are a definite threat to the console and handheld gaming devices as consumers can stream tablet content to the TV and tablet graphics hardware is becoming exponentially more powerful. The dynamic of being able to use one device for many different purposes is an influence going forward. However, at the core the argument for smartphones and media tablets killing the handheld gaming market is currently purely based on volume. The number of iPhones in the market, the increasing popularity in media tablets, the explosive revenue from mobile gaming - and not to mention the number of copies that Angry Birds has sold - raises warning signs to Nintendo and Sony, but are the people who are using the media tablets and smartphones the same people who owned a DS model or PSP as many of these users are not traditional gamers? With the next-generation handhelds out in the market now, 2012 will be the year that will answer these very questions, which IHS iSuppli will following closely.
This section varies from device to device. At the very minimum it should consist of the "main cost drivers" table, but should also be the place where we talk about pricing assumptions made in the analysis. This section should always include the boilerplate text "What's Not Included in This Analysis".
Total BOM: $192.72
Top Cost Drivers below: $150.56
% of Total BOM 78%
Main Cost Drivers below
$45.5 - Chi Mei Communications Systems ZOEDA-BB1-S9-17618 3G Half Mini PCIe Module - Quad-Band WCDMA/HSUPA/HSDPA, Quad-Band GSM/EDGE- (Qty: 1)
$44 - Samsung Mobile Display AMS495QA01 OLED Display Unit - 5" Diagonal, 16M Color AMOLED, 960 x 544 Pixels, 115um x 115um Pixel Size, 110mm x 62.5mm Viewable Area- (Qty: 1)
$30.67 - Sony CXD5315GG CPU - Quad-Core, ARM Cortex-A9 + 4Gb Mobile DDR2- (Qty: 1)
$12 - Display Window / Touchscreen Assembly - 5" Diagonal, Capacitive, Painted, Printed- (Qty: 1)
$4.13 - Sony Energy Devices Corporation SP65M Battery - Li-Ion, 3.7V, 2210mAh, w/ Power Management Circuit, Integrated 3 Discrete Wires, 1 3-Position Pin Socket Connector- (Qty: 1)
$3.39 - UniMicron Technology 10-Layer - FR4/RCF HDI, 1+8+1, Lead-Free, Halogen-Free- (Qty: 1)
$2.93 - Marvell 88W8787S-BKB2 Bluetooth / FM / WLAN - SoC, 802.11a/b/g/n, Bluetooth 3.0+HS, FM Receiver & Transmitter- (Qty: 1)
$2.8 - Enclosure, Main, Bottom - Injection Molded Glass-Filled Nylon, Painted- (Qty: 1)
$2.6 - Toshiba Semiconductor THGBM3G5D1FBAIE Flash - eMMC NAND, 4GB, MLC- (Qty: 1)
$2.55 - Renesas ASIC- (Qty: 1)
The total materials and manufacturing costs reported in this analysis reflect ONLY the direct materials cost (from component vendors and assorted EMS providers), AND manufacturing with basic test. Not included in this analysis are costs above and beyond the material manufacture of the core device itself " cost of intellectual property, royalties and licensing fees (those not already included into the per component price), software, software loading and test, shipping, logistics marketing and other channel costs including not only EMS provider and the OEM's margin, but that of other resellers. Our cost analysis is meant to focus on those costs incurred in the manufacture of the core device and exceptionally in some circumstances the packaging and literature as well.
We do provide an Excel tab "'Overall Costs'" where a user can enter their known pre and post production costs to build a per unit cost reflective of theirs actual expenditures.
Notes We do not know for certain who is building this console for Sony, but we do know that HonHai (Foxconn) has been an EMS partner of choice for the PS3 in the past. As the world's largest EMS provider, Foxconn has been a big player with Apple and many other OEMs with high volume products, and is a likely source here. Sony also has a large facility in China where some handsets and certain other consumer products are produced in house.
Country of Origin
Based on markings, we have determined the country of origin for various assemblies:
Box Contents - China
Camera Assembly - China
Display / Touchscreen - China
Half Mini PCIe Module - China
Main PCB - China
Misc PCB Assemblies - China
Country of origin assumptions relate directly to the associated cost of manufacturing, where calculated by iSuppli. In the cases of "finished" sub-assemblies (such as display modules), we do not calculate internal manufacturing costs, but rather assess the market price of the finished product in which case country of origin assumptions may or may not have a direct effect on pricing.
Labor rates are applied directly only to hand inserted components and systems in our bill of materials, and although regional assumptions do, these new rates do not have a direct effect on our modeled calculations of placement costs for automated SMD assembly lines. "Auto" inserted components (such as SMT components) placement costs are calculated by an iSuppli algorithm which allocates a cost per component based on the size and pincount of the device. This calculation is affected by country or region of origin as well.
The Sony PlayStation Vita clocks in at a total of 1308 components (excluding box contents). At first glance this seems overwhelmingly more complex than the Nintendo DS (704 components - ex box contents), but when you consider the fact that Sony purchases the 3G module as a single unit (we broke it down into it's sub components) - that would bring the count down to 969. Interestingly, the PSP Go we analyzed back in 2010 had a very similar component count of 954 components, but clearly this new device is more feature-rich, and basically adds functionality while keeping the overall complexity roughly the same as the PSP Go. The PlayStation Vita also has roughly the same number of assemblies in the device. The complexity overall is similar to smartphones.
Display / Touchscreen - Just like tablets - game consoles live and die by their choice of major user interface components, which is usually the display (which Sony has chosen a 5'" AMOLED from Samsung) and touchscreen. The choice of these components, as well as the choice of touchscreen controller is critical to tablets, phones and portable gaming devices. Interestingly, most of the AMOLED displays we now see from Samsung are "SuperAMOLED" or delivered with an integrated touch solution (turnkey including touch overlay, control circuitry, etc.). This solution does not appear to be SuperAMOLED. We are assuming, based on the sample that the touchscreen comes from a 3rd party and is integrated by another party that may be in addition to their EMS provider or in-house production. The net net, of this choice appears to be a less expensive solution for Sony.
Main PCB - The core of this design is a custom developed and fabbed chip for Sony (CXD5315GG) that features, per the specs, quad-core, ARM Cortex-A9 + 4Gb mobile DDR2. The chip itself has 4 die inside - 1 from Toshiba, we assume is the core processor, another from Samsung we assume to be 1Gb of video memory, and then there are 2x2Gb dies from Samsung. This chip is unique to Sony and the product and is one of the priciest components as well.
Additionally Sony have chosen Marvell for their WiFi/Bluetooth/FM Radio "combo" module solution. Broadcom and Texas Instruments dominate this space, and we rarely see Marvell. There is also an ASIC from Renesas (likely a microcontroller) but we cannot positively identify the part and it's function.