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Sony 'won't take a big hit' introducing PS4 like it did with PS3

CFO Masaru Kato explains the different business model Sony adopted for its new console

Sony's adoption of third party technology and production capabilities for PS4 means the company won't take the "big hit" it suffered launching the console's predecessor.

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The company spent a fortune designing the PS3's Cell processor and its own semi conductor facilities, and Sony chief financial officer Masaru Kato said as far back as 2011 that a repeat wasn't on the cards for PS4.

Addressing analysts during the company's earnings call this morning, Kato explained the platform holder's different approaches to developing and launching PS3 and PS4.

"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.

"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."

Sony revealed PS4 in February, when it confirmed a PS4 release date of "holiday 2013" in at least one of Japan, Europe and the US.

Earlier today, Sony announced that it had swung to an annual profit for the first time in half a decade, but the company's games business has struggled, with the PlayStation division posting a notable drop in sales and operating income for the financial year ended March 31.

Sony also published annual PlayStation hardware sales forecasts for the current business year, which include an expected decline in the adoption of its portable systems.

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