iSuppli: Sony Still Losing $50 With Each PS3 Sold

Research firm iSuppli says that Sony continues to sell PlayStation 3 hardware at a loss, losing about $50 with each unit sold, each $399 system costing the company $448.73 to build. According to the agency's previous research, however, Sony has significantly brought down manufacturing costs since the PS3 launched in November 2006, when it spent over $840 for the components in a $599 model, and $805 for the components in a $499 system. To cut down on those costs, the company has taken advantage of smaller, cheaper chips, with the Cell processor's price down from $89 in 2006 to $46, and the Nvidia Reality Synthesizer down from $129 in 2006 to $58. Because smaller chips require less power, the systems now ship with a smaller and less expensive power supply, costing $21.50 instead of the previous $30.75. Sony's decision to exclude the "Emotion Engine" PS2 CPU chip, which was used for backwards compatibility purposes with PS2 games, from its newer models also likely contributed to the cheaper manufacturing costs. The company was able to further reduce costs by reducing parts -- when first released, the system was comprised of 4,048 parts, including those in the controller. Since then, the number of parts has been tapered by about 30 percent to 2,820, according to a report from BusinessWeek. Though Sony has depended on software profits to make up for its hardware losses during the PS3's entire lifespan, iSuppli believes that the company will reach a break-even point with manufacturing costs and even turn a profit in 2009. "Every time we do a teardown, it's sort of backward-looking," says iSuppli analyst Andrew Rassweiler. "Sony is one step ahead of us and probably has plans to re-spin the hardware to reduce the costs yet again."