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Discussion on Article:
Sony’s PlayStation 4 to Feature 50% Higher Compute Power Compared to Xbox Next – Rumour.
You have not accounted for 3 factors:
1) HD8000 series will shift HD7000 to 'obsolete' SKU status by Q4 2013 (when PS4/Xbox 720 are expected to launch, HD7000 chips will be old tech/cheaper to purchase). Even without HD8000 series, prices of HD7000 series will fall over the next 12 months.
2) Cut out the middle men. AMD sells the actual chips to AIBs which then have to purchase the PCB/memory/cooling, etc. The AIBs also want to make $ and channels/stores that sell GPUs also need to make $. MS and Sony enter into contracts to purchase millions of chips directly. Therefore, you cut out these 2 middle-men (AIBs and places like Newegg/Amazon that each take a cut on each GPU sold). Therefore, MS/Sony will be able to purchase HD7850 "kit" for much less than $140. You cannot look at retail prices of GPUs as a yard stick for prices MS/Sony get directly.
3) HD7850 will not be a mid-range GPU in 2013 once HD8000/GTX700 launch. That level of performance is most likely going to be low-end in GPU tech by Q4 2013. Therefore, while HD7850 doesn't actually sound too bad, by the time these consoles launch, it won't be impressive by any stretch of the imagination as you are making it sound.
that's exactly the way the console market is run: make a loss at first on the hardware, profit on the software, and after some years when the hardware can be made cheap enough get profit on that too.
this is the way the console industry has done it since the Nintendo Famicom (8-Bit).
the set price tetherd into the research and developement fee cost whatever the cost was for that hardware during the start of the mass production is the set cost for the next 3 to 4 years until the research and developement fees which includes all the hardware that goes along with it until it is paid off. which is why console prices don't start dropping from its original price until 3+ years after those research and developement fees are paid off and the hardware is no longer tetherd into those set cost fees.
Well everyone knows that buying directly is cheaper so is by the bulk but you also have to include taxes and shipping fees as well so at the end of the day they aren't getting a lot less cheaper deal then retail.
The 7850 is a high midrange gpu. and the 8000 series along with the GT 700 series aren't going to be based on a totally new arch, which will end up making both series refresh series of the current series out now. So there shouldn't be that much performance increase over the last series much like with the GT 4xx and GT 5xx series or the Radeon 5xxx and Radeon 6xxx series were to each other.
First, there is minimal R&D spending for off-the-shelf PC parts anyway. Second, the price of that chip is not set in stone for the entire generation. Prices of chips drop over time. As 28nm node matured and yields improved, HD7850's price fell from $249 MSRP to $140-150 in retail today. Let's say AMD sold that chip for $70-80 to AIBs at launch. This doesn't mean that right now AMD still sells HD7850 GPU at those prices to AIBs. This is how prices are cut over time in tech.
When you look at the actual cost of these GPUs, you are missing a huge chunk of profits AIBs and retailers make that's built into the retail price. Even NV's / AMD's highest end GPUs like GTX680 and HD7970 only sell for $100-130 to AIBs. I don't think you have a clear grasp of what the actual GPU pricing is directly from NV/AMD. It's not $250 for a $300 card or $400 for a $500 card.
Here is a good chart for some older gen cards with a breakdown of costs related to each component in a GPU:
AMD sold HD6970 GPU for $85 and the total cost to assemble this to AIBs was $189.35. HD6970 sold for $370 in retail.
NV sold GTX570 GPU for $85 to AIBs and the total cost to assemble this was $167.48. The GPU had an MSRP of $349.99.
Mid-range products of that generation were GTX560Ti ($106 cost for the entire card) with $249 MSRP and HD6870 ($119 for the entire card) with $239 MSRP.
Right now HD7850 goes for $140-150 in retail channels which means the total cost of kit to AIBs is likely $100-110 and AMD sells these GPUs for $50-60. By Q4 2013, the total cost to Sony for HD7850 will be under $100, easily.
The entire GPU subsystem inside Xbox 360 cost MS $141 at cost! That means this was roughly equivalent to a $250-300 retail GPU if AMD's AIBs sold this chip directly at Newegg, etc.
"...the total bill of materials (BOM) cost for the Xbox 360 Premium reaches $525, well above the retail price of $399. The GPU, designed by ATI Technologies to provide high-definition (HD) graphics, costs an estimated $141, including embedded DRAM from NEC."
Also, most companies who bid for consoles and win those contracts aren't doing it to make a lot of $. It's more about aligning with such an important project/client for brand building, future customer recognition, etc. That means when AMD sells GPUs to Sony/MS, the profits will be minimal, which means Sony/MS won't paying a large premium to AMD for the chips.
you said that there isn't a 7850 for that much and i simply pointed out that 7850's run at the 200 dollar price range as well.
The hardware is thethered into the research and development fees whatever the cost was when mass production started is tethered into that set cost for the hardware as well.
There is a key diff between retail price reduction for consumors and whats been contracted with developement, becaue everything with that console is tethered into the production of those fees until those fees are paid off, which again is why consoles do not fall int price until those fees are paid off where anything that was once in developement under those fees are no longer binded to whatever the set price was when the developement of that console went into mass production.
actually whatever sony is paying for the 7850 will be a set price for the hardware beacuase the develepoment for which the hardware is under is tethered into those fees. like i said this is why console prices dont' go done until after 3 to 4 years. it's like a buying a new car with a loan you are still going to pay for what you bought it for, for the next 5 or 6 years regardless if that car drops in value, because the loan in which you needed to buy that car from your bank was set at that price when you bought the car until you pay the loan off. your loan doesn't get smaller because your car drops in value each year. Same for these developement fees they have to pay off these fees and whatever the set prices were with those fees is a set price from when they first began production until those fees are paid off and because the hardware is tetherd to those fees as apart of the develelopment that price doesn't change due to the fact that it's tide into those research and developement fees.
That was not the actual cost of the xbox 360 and ps3 to produce, the xbox 360 and ps3 were selling their consoles at a loss when they first came out. The xbox 360 and ps3 cost more to produce then what they were selling it for, and to offset this loss they count on demand. as long as the demand is great then it will help them turn a profit.
yes you are correct but the profits in which amd will get out of this is going to help them make money. either way you look at it it, it's win win for amd. AMD might not be making the same money as they would selling retail, but they are making money off of these consoles or else they wouldn't be doing it if they weren't going to make a profit off of it.
You obviously didn't look at Mercury Research chart I posted that shows the actual cost of GPU hardware components to AMD's/NV's AIBs.
Like I said, MS/Sony can license out the manufacturing of AMD's GPUs or buy them directly from AMD and then solder the parts to the motherboard. The prices for these components are NOT fixed for 3-4 years as you keep saying. This is why Sony and MS are able to drop prices on their consoles as they shift manufacturing to lower nodes. This is also the primary reason MS ditched NV for Xbox 360 because NV didn't drop prices on its GPU in Xbox 1, pissing MS off. With AMD, MS negotiated the contract where they own the right to manufacture the GPU and thus the benefits of cheaper manufacturing over time trickle down to MS. The same will happen for PS4/720 because AMD is the rumored partner.
For example, more features and lower prices trickled down to Xbox 360 way before the 3-4 year mark you mention:
If you take an HD7850 chip and buy the other components (power deliver, thermal/cooling system, VRAM), it will not cost MS/Sony more than $100-110 all in for those parts. I already linked you the cost breakdown for Xbox 360 where the GPU cost MS $141. The total manufacturing/component cost for Xbox 360 was $525 (with a $141 GPU subsystem), and yet they priced it at $399 MSRP. Therefore, an HD7850 is easily possible for next consoles from a cost perspective. I am not saying PS4 will have an HD7850, but cost is not a big deal for such a low-end GPU unless MS wants to pull a Nintendo and make $ on the hardware or ditch losing $ on hardware sold. If we heard rumors of HD7970 or something, then sure the cost would become a factor.
The total components costs for a $499 GTX580 were $210. Those are the costs to the AIBs. Think of the AIBs as MS/Sony. Everything that happens between $210 and $499 are additional marketing/packaging/etc. expenses by AIBs/retailers and profits that AIBs/retailers tack on. MS and Sony do not face these costs for the GPU alone. Therefore, a $140-150 HD7850 does NOT cost MS/Sony $140-150 to purchase from AMD!
they are only to drop the prices once the development cost and research fees are paid off. So yes they are fixed
Nodes don't effect cost. the xbox 360 were selling their consoles the same price for the first 3 years even when it went through diff changes in the hardware spectrum on the gpu and cpu side.
Yes and when did the xbox 360 had finilized specs and started going into mass production? way back in 05 so 05 06 07 thats 3 years before the prices dropped on their manufactioning which means their fees were paid off by then to start to see a reduction of prices across the board thus 3 years.
ok and did sony and micrisoft sell their consoles at a loss when they debuted? yes which goes back to what i was saying that these companies don't start turning a profit until 3 to 4 years after the development fees and everything else that was tethered into that development agreement was paid off.
no one said the 7850 did. i stated that they aren't getting it for a lot less when you tie the cost of taxes shipping and everything else either that many online retail stores you don't have to pay for which isn't account for for their overall cost. plus amd is in the buisness of making a profit. if there was little to no profitable gain invovled then they wouldn't do it.
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