Business - Sony Cuts PlayStation 3 Component Costs by 35 Percent

Sony Computer Entertainment has cut the cost of materials used to make its PlayStation 3 game console by 35 percent, according to market research firm iSuppli.

The components used to produce the second-generation of the PS3 console cost US$448.73, based on October component prices, iSuppli said, citing a recent teardown of the system it conducted to see what components are used inside. The market research firm then assembled a bill of materials based on that list of components and estimated prices to arrive at a system cost.

By comparison, the components used inside the first generation of the PS3 cost $690.23, based on mid-2007 prices, iSuppli said.

Sony makes a loss on the sale of each PlayStation 3 console, which sells for $400 on Amazon.com. But the loss Sony records for each console is narrowing, and the company may soon reach the break-even point, including other costs associated with manufacturing and sales.

"The PS3 may be able to break even in 2009 with further hardware revisions," iSuppli said in a statement.

Sony managed to cut the material cost of the second-generation PlayStation 3 by using more advanced components. In particular, the consoles use a more advanced version of the Cell processor and other chips made using a 65-nanometer manufacturing process, instead of the older 90-nanometer process. This shift reduces unit manufacturing costs for each chip and lowers power consumption, which means Sony can use a less expensive power supply.

The number of components inside the PS3 has also been reduced, as functions previously handled by different chips have been combined in a single part, iSuppli said.