The PS3 and its integrated Blu-ray player helped Sony win the high definition disc format war over HD DVD. And undoubtedly there is money to be made in software and download services if the install base ticks over a critical mass.
But the latest iSuppli Corp report on manufacturing costs show that despite a significant reduction, manufacturing costs of the Sony flagship electronic device still outstrip retail return some two years after hitting the market.
Initially the cost of a launch US$599 PS3 was a whopping US$840, with the US$499 model checking in at US$805 to build when hitting the market.
The iSuppi analysis now has PS3 manufacturing costs ticketed at US$448.73, which would be okay for Sony if it were not for the fact that they are selling PS3’s for US$399.
Over the intervening two years, Sony have revised the manufacturing process of the games console, reducing chip numbers within, removing the backwards compatibility emotion engine, SSD card readers and USB ports on some models.
Overall the number of micro-chips contained in the PS3 has been reduced by around 30 percent.
There have been savings in both the integral Cell and graphics processors. The Nividia Reality Synthesizer graphics components now costs US$58 instead of the original US$129 and according to iSuppli the Cell chip costs Sony $46, down from the $64 in 2007, and $89 in 2006, it is now built on a 65-nm process rather than the original 90-nm.
An added bonus of chip rationalisation and reduction is that the PS3 now ships with a reduced output and cost power supply, further saving on manufacturing costs.
According to iSuppli Sony may hit the breakeven cost versus retail price point sometime in 2009: "Every time we do a teardown, it's sort of backward-looking," says iSuppli analyst Andrew Rassweiler. "Sony is one step ahead of us and probably has plans to re-spin the hardware to reduce the costs yet again," he says.