Sony's PS3 Cost-To-Build Falls 35%. Pass On The Savings! (SNE)

We’ve insisted Sony (SNE) needs to cut prices on its PS3 game console, and now Sony can afford to do so: Over the past year, Sony has dramatically reduced its manufacturing costs.

It costs Sony $448.73 to build a PS3, says a teardown analysis by market research firm iSuppli. That means Sony still loses a pretty penny on every $400 gaming console it sells, but it’s a huge improvement over just last year, when it cost Sony a whopping $690.23 to make a PS3.

iSuppli’s estimates are just that — estimates — but the cost reduction is probably real. Why the decline? iSuppli credits “clever integration of discrete components” that’s reduced the number of parts in the PS3 from 4,048 to 2,820.

For the PS3 to stay in the game against Nintendo’s (NTDOY) Wii and Microsoft’s (MSFT) Xbox, Sony needs to pass those savings on and reduce the PS3’s retail price. Sony probably hoped it could keep the savings to itself. But then, Sony probably hoped the PS3 wouldn’t see shrinking market share heading into the 2008 holiday season.

See Also:
Sony’s PS3 A Sinking Ship: Sales Plummet
Exclusive: Sony PSP2 rumours Bogus, No New Handheld Gaming Gadget Coming
Sony Cuts PS3 Prices By $150 — If You Have Good Credit
Mainstream Media Drives Nail Into PS3 Coffin

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