I feel like you're misunderstanding the conversation around price on the PS5.
It's not about what Sony (or MS for that matter) can "afford" in terms of production costs or losses on HW at launch. And it's not about whether Sony can sell more consoles than MS at a certain price point. Gaming is a huge percentage of Sony's overall business, and therefore the profitability of their gaming division dives a large part of the company's overall financial position (and therefore stock price, an item extremely important to decision-makers in the company).
At the end of the day, their decision-making goes like this: "If we build a box at a $500 price point, rather than a $400 price point, are we going to sell more consoles and drive more gaming revenue?" If the answer is "no" then it doesn't make sense to build a $500 box unless you think there are external strategic factors at play. Consider all the factors that are constantly raised in Sony's favor in the console wars threads:,
- Exclusive games are a key driver of platform choice, and Sony's first-party has been much more successful than MS over the past decade
- Xbox has barely any presence in most markets outside of US/UK
- Playstation brand loyalty / presence is so strong that just posting the PS5 logo on Twitter/Instagram drove incredible social media engagement
- By virtue of its market position, PS is able to obtain third-party exclusive deals much more cheaply than Xbox
Based on the above, and considering that the lion's share of profits in the console space is based upon collecting the platform fees for games, selling services such as PS+, and selling accessories, it would make the most business sense to design your console for a price point that is going to move the most total units. When you consider all of that, why would Sony care to engage in a spec pissing contest if they could provide a functionally on-par box at $400?
(Alternatively, if you want to take the position that then they would just eat a $100 loss on each console, consider what that means. Assume that over the life of the console, that number becomes $50; because maybe they're eating $100 on the early consoles but that number decreases over the life of the console. If they sell 100 million consoles this generation, eating $50 per unit means $5 billion less profits. That doesn't make sense at all, when you could invest that money so many different ways.)
Does this mean it never makes sense for Sony to target the high end of the price range at launch? No. Maybe they've decided that VR is still poised to be the next big thing, and have decided that they need the specs of a $500 box to deliver on a next-gen VR experience with PSVR2 in 2022? Or maybe they think that by not ceding any performance high-ground to Xbox they can get MS out of the console business for good? Or maybe they feel like by beefing up the specs today, they may lose a certain number of sales early in the generation, but they'll be able to extend the PS5's life for a year or two more, which will be overall more profitable in the long-term?
This is what people are talking about when they question whether it makes sense for Sony to design their console at a $500 price point. For reasons discussed immediately above, that doesn't mean there's no way they'll do it. It just means that, on the face of things, there are extremely compelling business reasons to target a more modest price point.