In an interview with Business Week, Shigeru Miyamoto discusses the development process behind the Wii.
When asked if a $250 Wii console was always in the cards, Miyamoto revealed that he wanted the system to be cheaper than the end result. "Originally, I wanted a machine that would cost $100. My idea was to spend nothing on the console technology so all the money could be spent on improving the interface and software. If we hadn't used NAND flash memory [to store data such as games and photos] and other pricey parts, we might have succeeded.
"To answer your questions, yes, we set out to design a console that would sell for less than 25,000 yen ($211). It was a tall hurdle. But unless you start off with a target, you can't control costs and you'll inevitably lose money. Also, we thought a low-cost console would make moms happy," Miyamoto said.
Also mentioned in the interview was the fact that if the Nintendo DS hadn't been successful, the company would likely have gone back to the drawing board with the Wii.
Source: Business Week