Despite of earlier reports that Sony Computer Entertainment Inc. managed to halve production cost of the PlayStation 3 video game console already in 2007, according to a recent teardown analysis, the console still costs $448 to build, thus, being money losing machine for Sony. Still, it is considerably lower cost than initially.

Back in 2006 Sony PlayStation 3 20GB and PlayStation 3 60GB video game consoles cost $805.85 and $840.35 to manufacture, respectively. At that time Sony sold its consoles for $499 and $599 and lost $306.85 and $241.25 on 20GB and 60GB versions hardware alone, respectively. This year the PS3 40GB costs $448.73 to build amid official pricing of $399 in the USA, hence, Sony loses “only” $49.73 per unit.

But the reduction of the cost came at a price: the currently available PlayStation 3 40GB is not compatible with PlayStation 2 games since Sony removed appropriate components from the console when it launched it early this year. The move was heavily criticized by PlayStation fans, but it did allow Sony to tangibly boost sales of the game machine because it helped to lower the price.

The removal of legacy as well as further optimization of the design allowed SCEI to dramatically reduce the amount of components: the original PlayStation 3 60GB featured 4048 different parts, whereas the PlayStation 3 40GB sports 2820 parts, according to iSuppli company's teardown results published by BusinessWeek web-site.

The most expensive component of Sony PlayStation 3, Nvidia’s Reality Synthesizer (RSX) chip, now costs Sony about $58, down from $129 two years ago. Another important chip inside the video game console, the Cell processor, costs $46, which is also about two times less than $89 initially. The reduction of the pricing should be associated with higher yields as well as thinner manufacturing technology. Initially the Blu-ray optical disc drive cost Sony $125, its current price remains unknown.

Teardown estimates do not usually include additional costs for elements including the controller, cables, packaging, freight as well as profit for resellers, such as Amazon.

It is ordinary for game console makers to lose money on hardware, and make up for the loss via video game-title sales. Still, the size of Sony’s loss per unit is still a pity, even for the video-game console business. It is expected that Sony may reach the break-even point with the PS3 in 2009.

SCEI did not comment on the news-story.

Tags: Sony, Playstation