Analysts Estimate $800 Manufacturing Cost For PS3

Investment analyst firm Merrill Lynch has released a new financial report in which it estimates that the manufacturing cost of the PlayStation 3, ascertained by adding up the cost of the component parts, will be $800 on or around the system's launch, due to the cutting-edge nature of the console. The report follows a previous report from one of the company’s Japanese analysts that suggested the PlayStation 3 would not be launched until late 2006 in Japan and early 2007 in North America – although these comments were quickly refuted by Sony itself. Describing the new console as an “expensive and difficult-to-manufacture product”, the short report identifies the Cell processor and Blu-ray disc drive as the “problem points” that could see the cost of the console rising to $800 at launch, falling to $320 after three years. The report estimates the cost of manufacture of the Cell processor to be at least $230 initially, thanks to a complex and expensive manufacturing process. It also cites rumors of delays on the Nvidia-designed RSX graphics processor, although these are described as not being as much of a long term challenge as Cell. The cost of the Blu-ray disc drive is estimated at $350, while the speciality XDR memory is estimated to cost $50 at first. As with all consumer electronics, the cost of manufacture is expected to fall over time, with the shift to 65nm manufacturing for the Cell processor cited as an important milestone, along with scaling Blu-ray volume in other devices. The majority of home consoles have traditionally been sold at a loss when first launch, not least including Sony's PSP, which was launched at a price very much lower than most estimates. As such, Merrill Lynch avoids predicting a consumer price for the console – with official information not likely until E3 this May at the earliest. Fall-out from the report, which was also relatively skeptical regarding the Spring 2006 launch date for the PS3, meant that Sony shares fell almost 4 percent to 5,300 yen ($45) on the Tokyo stock exchange, on speculation that a later launch for the PS3 would affect Sony's results adversely over the longer term.