Report: PS3 manufacturing costs drop 35%

In November 2006, computer hardware research firm iSuppli initially estimated the production launch-day cost of each $599 60GB PlayStation 3 as being $840.35. By mid-2007, it had lowered that figure to $690.23, thanks to improvements in the manufacturing process and supply chain. Later that year, the 60GB and 20GB PS3 models were replaced by 80GB and 40GB editions priced at $499 and $399, respectively.

Now, the month after the PS3's second birthday, iSuppli's Teardown Service arm has released its latest manufacturing-cost estimates for the now-$399 80GB model. The latest revision of the console--which has no PlayStation 2 backward compatibility--reportedly costs Sony about $448.73 in parts and labor, a 35 percent reduction from summer 2007. The 40GB model was discontinued this past summer, and no mention was made of the new $499 160GB model, which comes bundled with Uncharted: Drake's Fortune.

iSuppli credits the savings to the 65nm production process of the PS3's Reality Synthesizer (RSX) graphics chip, made by Nvidia, and Cell CPU, produced by Toshiba and IBM. (Sony had produced the Cell itself but sold its production facilities for the chip to Toshiba late last year.) The new process allows for the "integration of discrete components into the core silicon of the PS3, dramatically reducing the [non-silicon] component count." Whereas the original 60GB PS3 had 4,048 individual components, the new version has just 2,820.

The dramatic reduction of parts and other increased efficiencies may soon help the cash-strapped Sony achieve a long-sought-after goal for the PS3: hardware profitability. "With its new-generation PS3, Sony has come closer to breaking even, although it probably hasn’t quite reached that mark yet," explained Andrew Rassweiler, director and principal analyst of iSuppli's teardown services.

Rassweiler thinks that the next revision of the PS3 hardware, likely due sometime in 2009, could see the console cease to be a loss leader for Sony. That would help it join Nintendo, which makes a modest profit on each $249 Wii it continues to sell at a staggering rate. It is unclear how much money Microsoft currently makes or loses manufacturing the problem-plagued Xbox 360, the hard-drive-less Arcade variety of which now costs just $199.