Sony stock plummets following reports to the company cutting production of PlayStation 5

The reports of Sony’s plan to cut production of the PlayStation 5 gaming console led to a decline of the company’s stock on Monday and Tuesday.

During early trading on Tuesday, Sony’s stock fell more than 3% and later declined 2.4%.

Although the company is yet to release any official statements, news outlets carry the reports citing undisclosed sources familiar with the matter. According to Bloomberg reports, Sony cut its estimated production of the PlayStation 5 for the fiscal year by 4 million units. Adding that, this was in relation to production issues the company had with custom-design system-on-chip (SOC) for the console.

Bloomberg’s report also stated that the company’s electronics powerhouse has been faced with many production issues, with yields as low as 50% for its SOC.

When asked about the rumors by CNBC Sony declined to comment.

Despite the 4 million unit’s reduction from 15 million to 11 million, Kazunori Ito, a senior analyst with Morningstar Investment Management Asia said in an email sent to CNBC that Sony’s shipment still remains the “largest shipment number on the year of launch” when compared with previous platforms.

Mr. Ito said that if the company is able to still ship 11 million units for the fiscal year there are no worries that the “shortfall will be critical.” He also said that the focus of the market will be on the pricing of the games and the pipeline of games.

Sony is yet to release any official statement carrying pricing details of the PlayStation 5. There is a possibility of the company sending out a showcase by Wednesday.

This latest development of the Sony gaming console comes as the competition for next-generation gaming with Microsoft’s Xbox strengthens. Sony is yet to release an official launch date as well as other necessary details about its console. In May, the company said it was on track to launch in time for the 2020 holiday season against all odds presented by COVID. However, Xbox has set its launch date for November 2020.

As a whole, the gaming industry has seen a boom in sales as the ongoing coronavirus pandemic has caused more people to stay at home. A good example is Nintendo which saw more than a 400% on-year increase in operating profits in the quarter that lasted from April to June.