PS3 component prices fuel debate

The pricing disparity between the components for the two consoles comes largely because the Sony box will contain a Blu-ray drive, which supports the new high-definition Blu-ray DVD format. That could cost $200 to $300 or more per console. The processor in the PS3 also will likely cost more.

The unusual nature of the new console's component menu makes it difficult to pinpoint the cost estimate. The PS3 will be one of the few machines on the market with XDR memory, based on designs from Rambus.

Some analysts have suffered addition problems, too. Merrill Lynch wrote in a widely publicised research note that the component bill would total $900, not including a detachable drive, but Merrill later told CNET.co.uk's sister site, CNET News.com, that it meant to say $800.

Nonetheless, the cost of the rest of the components is roughly equal for both the Sony and Microsoft consoles, according to various analyst estimates.

The materials price estimates do not include marketing, software development, advertising or other costs, which will push Sony's total cost per console even higher. A Sony representative said the company would not comment on pricing.

A mismatch between the retail price and the cost of materials for a game console isn't unusual, because console manufacturers expect to make up the difference by selling games to run on the consoles. That's what Microsoft did with the Xbox 360.

The cost of making game consoles also drops rapidly over time because manufacturers don't usually upgrade the configurations year after year, while the cost of the components they're using drop. Merrill Lynch, in fact, estimates that the component bill will drop to $320 in three years, not including the detachable drive.

Ken Kutaragi, who heads up Sony, is counting on it. In 1999, the processor and the graphics chip inside the PS2 took up 239 and 279mm² in surface area, respectively, which made them relatively large (and hence relatively expensive) chips, he noted in a speech in February in San Francisco. By 2004, the two chips were condensed into one that took up only 87mm², almost one sixth the size.

Here's how the components stack up.

Processor
The PS3 will be a showcase for the Cell processor from the SIT powers (Sony, IBM, Toshiba). The cell consists of a PowerPC core with eight signal processing cores. While the large number of cores help run multimedia applications, they also make for one large chip. Cell will take up 221mm² of space, larger than the 168mm² of the Xbox 360 processor. Larger chips are typically more expensive to make.

A greater percentage of the real estate on the Xbox 360 chip, also from IBM, is given up to cache memory. Cache is typically cheaper to manufacture than logic transistors, which own more of the real estate on Cell. As a result, Sony faces two disadvantages in terms of cost.