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Sony Reportedly Slashing PlayStation 5 Production 26% This Year

By Rich Duprey – Updated Sep 15, 2020 at 12:39PM

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Chip yields are said to be so low as to hamper the new game console's introduction before Christmas.

Sony (SONY 1.81%) won't be able to meet demand for its new PlayStation 5 gaming console because chip production issues are causing it to slash the number of units it produces this year by 26%, Bloomberg reported on Monday.

Bloomberg says production yields for its system on a chip, the core processing unit of the next-generation system that was designed with Advanced Micro Devices (AMD -1.78%), have fallen as low as 50%, meaning half of the chips produced were of such poor quality that they were discarded during the manufacturing process. 

So rather than the 15 million units that Sony was expected to ship this year, the news outlet says only 11 million will now be produced.

Sony PlayStation 5 game console

A PlayStation 5 console. Image source: Sony.

Sony has yet to announce when it will release the PlayStation 5 to the market, only that it will be in time for the holiday season. Microsoft (MSFT -0.06%) recently revealed that its own next-gen console, the Xbox Series X (and the lower-cost Series S), will go on sale on Nov. 10.

Earlier this year, as the COVID-19 pandemic gripped the world, Sony took a cautious approach to its new game-console production estimates, initially telling its production partners it only wanted enough components for 5 million to 6 million units.

So even if the video game company does produce 11 million units this year, it will still be double what was originally anticipated. Still, as the upgrade cycle for consoles is poised to begin, analysts say they would not view favorably any production problems cutting the number of units. 

Citigroup analyst Kota Ezawa told clients in a note, "If the news is accurate, we would view the reduction as negative."

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Microsoft and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. The Motley Fool has a disclosure policy.

Stocks Mentioned

Sony Group Stock Quote
Sony Group
SONY
$80.62 (1.81%) $1.44
Microsoft Stock Quote
Microsoft
MSFT
$247.26 (-0.06%) $0.14
Advanced Micro Devices Stock Quote
Advanced Micro Devices
AMD
$69.22 (-1.78%) $-1.25

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