Sony says semiconductor shortage makes it difficult to ramp up PS5 production

Sony has shipped 4.5 million PlayStation 5 consoles worldwide through the end of 2020, the company revealed in a earnings report on Wednesday. The number is broadly comparable to the 4.5 million PS4 consoles shipped during the 2013 holiday launch quarter of this system. But potential PS5 customers shouldn’t expect the production rate to increase, Sony said, despite widespread retail sales that have led to substantial profit margins.

“It is difficult for us to increase production of the PS5 due to the shortage of semiconductors and other components,” Sony CFO Hiroki Totoki said in a briefing accompanying the results. “We have not been able to fully meet the high demand from customers [but] we continue to do everything in our power to ship as many units as possible to customers who are expecting a PS5. “

Overall, Sony’s Game and Network Services division saw its vacation quarter profits increase nearly 50% year-over-year. The company is now forecasting the best fiscal year performance for the games division in company history, largely thanks to an increase in PlayStation Plus subscriptions (which now stands at 47.4 million). So far, 87% of PS5 owners have subscribed to PlayStation Plus, Sony said, making those subscriptions key to the company’s future profits.

“Strategic prices”

Despite performance at an all-time high, Sony said its gaming profits were affected by a “loss resulting from strategic pricing for PS5 hardware that was below manufacturing costs.” That’s not abnormal for newer consoles, which often launch at a loss to help create a larger following for software and services like PlayStation Plus and PlayStation Now.

But the specific “strategic” pricing of the PS5 could also reflect the console pricing chicken game played by Microsoft and Sony throughout 2020. The two companies have waited longer than usual to publicly reveal their plans for it. console pricing, with Microsoft ultimately breaking the seal on September 9. Sony announced the PS5 for $ 499 a week later (alongside a digital edition for $ 399), the Xbox Series S’s aggressive $ 299 price tag may have played a role in Sony’s decision to take the game. a loss on a “strategic price”.

Either way, Sony could eventually begin to make a direct profit on PS5 hardware sales as internal component costs decline and internal redesigns streamline the manufacturing process. In today’s earnings report, the company notes that it now sees “higher profit margins on PlayStation 4 hardware.”

Digital has killed the star of the game disc

Sony also revealed that nearly 63% of its “full games” sales for calendar year 2020 came from digital downloads rather than games sold on disc retail. This is a significant increase from Sony’s 43% share of digital sales in fiscal 2018 (ending March 2019) and 55% share in fiscal 2019 (ending March 2019). ending in March 2020). The increase reflects a long-standing trend away from disc games in the industry, and it’s a trend that will only accelerate now that about a quarter of all PS5 systems don’t even have no disk drive, based on the first hardware allocations.

Sony’s games division apparently continues to benefit from the effects of the global pandemic, the company said. “With the continued demand to stay at home and the launch of the PS5, we have achieved a very high level of user engagement,” the company said. “Total playtime for PlayStation users in December was about 30% higher than the same month last year.”

Demand for the aging PlayStation 4 had fallen to just 1.4 million units for the holiday quarter, from 6 million a year ago. This console has now sold a total of 114.9 million units worldwide, ahead of the original PlayStation but still well below the 155 million units transferred for the PS2.

Microsoft did not disclose unit sales of the Xbox Series X / S, but said in an earnings report last week that Xbox hardware revenue increased 86% year-over-year for the vacation term.