PlayStation 3 Production Costs Halved, Says Analyst

From $800 down to a bargain $400, the PlayStation 3 has its production costs in hand, claims wholesale investment bank Nikko Citigroup's Kota Ezawa. While the rest of the Business Week article retains the skepticism prevalent in just about any dissection of PS3 economics, it's the following that may be of interest to anyone who views the system's shortcomings in shades of sticker shock.

Nikko Citigroup's Kota Ezawa estimates the games division will lose $1.4 billion this fiscal year, following last year's $2.1 billion loss. And while he doesn't expect the business to be prosperous until late 2009, Ezawa applauds Sony's efforts to shrink the PS3's chips and tweak its design. Already such changes have cut the cost per machine to around $400 now, from above $800 just before it went on sale in November, 2006, he says. (The PS3 with an 80-gigabyte hard-disk drive retails in the U.S. for about $499.) "We think the biggest factor here is that simplification has become possible through a reduction in the parts count, leading to a reduction in costs," Ezawa wrote in a Dec. 27 report.

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