Although Microsoft and Sony may have launched consoles in roughly the same timeframe, and the Xbox Series X is technically the more powerful console, Sony’s pulling ahead in the sales figures. In 2020, the company sold a mighty 4.5 million units, which is an impressive accomplishment if you consider that the console was only out for a month and a half before the year was up. It’s unclear where the tally stands now, but it will likely be double that soon enough.

However, despite these surprisingly high sales figures, Sony isn’t making any money on them. In fact, Sony is taking a loss. The company’s earnings documents show that sony has two issues with the PS5 regarding the financials.

The most notable is that the company is taking a “loss resulting from strategic price points for PS5 hardware that were set lower than the manufacturing costs.” Next to that, Sony also had higher costs for selling, general, and administrative expenses related to the launch that it had anticipated.

Was a Loss Really Necessary?

Of course, taking a loss on console hardware, especially early in their lifecycle, is nothing new. In fact, it would be surprising if Sony wasn’t making a loss. It’s a common strategy to price the console hardware low in order to obtain mass adoption, which in turn leads to higher sales of PS5 games and PlayStation Plus subscriptions — because that’s where the money is made.

Yet, despite all that, I feel the elephant in the room does need to be addressed: Did Sony really need to make a loss?

The PS5, along with practically every other bit of gaming-related hardware, is currently in short supply, and scalping isn’t an uncommon practise. We’re still seeing PS5 consoles being sold for well over twice their $499 (disc edition) and $399 (digital edition) MSRPs by scalpers — profiteers who buy the consoles in masses at retail MSRP prices and then sell them for far higher figures because they’re out of stock everywhere. And people are willing to pay these prices.

Part of me would rather have seen a two-step pricing model. Give us a higher price today, with the promise of lower prices a year from now. I’d rather people put more money into Sony’s pockets than the scalpers’ (and eBay’s) wallets. At least Sony is the company actually making the product.

Could Sony Not Just Have Built More?

Not really. Nobody could see this pandemic coming, and the resulting extreme demand from it. Sony’s PS5 contains AMD hardware, which is manufactured by foundry TSMC — and TSMC is fully at capacity and cannot turn out any more chips. Considering that TSMC also makes the Xbox Series X’s hardware, along with CPUs and GPUs for AMD, and lots of chips in the mobile and automotive space… there’s not much capacity left to go around.

And by “not much” we mean there’s zero capacity. TSMC is literally selling every wafer it can possibly make, at premium prices. TSMC is investing billions into new chip foundries around the world, anticipating even higher demand for its services in the coming years. However, each new fab takes years to build, so it will be a while before fabless companies (like AMD, Nvidia, Apple, and more) can start getting more wafers.

For more details, check out our full PlayStation 5 review.