Sony Cuts PlayStation 3 Costs in Half, Analyst Says

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An industry analyst says Sony has managed to cut the production cost of the PlayStation 3 console in half, which will mean a significant improvement in the fortunes of the company’s games division.

According to a BusinessWeek report, Kota Ezawa of Nikko Citigroup said Sony has managed to cut the production cost of the PlayStation 3 to roughly $400 per unit, compared to a rate of over $800 per unit prior to the system’s release in November 2006. While he doesn’t expect the business to become “prosperous” until late in 2009, he did estimate the reduction in costs will lower the games division losses to $1.4 billion this fiscal year, down from a loss of $2.1 billion the previous year.

In a report issued on December 27, Ezawa wrote, “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.” The growing adoption of the Blu-ray format is also expected to boost the fortunes of the PlayStation 3 in the future.

Sony CEO Kaz Hirai referred to the PlayStation 3 cost reduction at the Consumer Electronics Show last week, expressing hope the system would become profitable in Sony’s next fiscal year, beginning in April. “The 40 gigabyte PlayStation 3 obviously has fewer components, and uses less power, which means that components required to dissipate heat, for example, can be smaller, so there is some cost reduction there,” he said.

“[Profitability] is not a definite commitment, but that is what I would like to try to shoot for.”

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