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The price of the PS3 is set to drop as the cost of key components such as blue laser pick up heads is reduced in price due to increased production runs. But the big question is will Sony Computer Entertainment pass on those cost savings or simply bow to Harvey Norman and keep retail prices up.

Mass market retailers like Harvey Norman are demanding and getting a massive margin on products like the Sony PS3. While Nintendo stood up to the retailers demands and said no, Somy Computer Entertainment bowed to the retailers demands and as a result, the PS3 in Australia is a tad under $1,000 making it one of the most expensive PS3 gaming consoles in the world.

SHN knows that Harvey Norman demands up to 17% margin then an additional 25% for sell through plus additional money for C0-OP advertising in Harvey Norman Media which last year was a massive profit centre for the mass market retailer. In the USA the same gaming system is sub $600.

During the next two months it will be interesting to see whether SCE Australia pass on anticipated cost savings to consumers as the build cost of the PS3 falls.

 

Components in the PS3 such as the blue-laser pick-up heads are expected to increase in supply and decrease in price, the production cost of the game console could be reduced by as much as A$140.00, according to Taiwan-based makers of game consoles and components.

Sony Shiroishi Semiconductor, a wholly owned subsidiary of Sony, on April 23 announced an expansion of its monthly production capacity of blue-violet laser diodes, a key component of HD-DVD and Blu-ray Disc (BD) PUHs, to 1.7 million diodes as well as the beginning of volume production of 240mW (milliwatts) blue-violet laser diodes in November of 2007. This will greatly increase the supply of blue-laser PUHs at lower prices, the sources indicated, noting the reduction of costs could reach A$140.

Besides a potential drop in the production cost of the PS3, the production cost of the Xbox 360 Elite has dropped to US$323.30 based on latest estimates by research firm iSuppli.

PS3 and Xbox 360 Elite: Breakdown of production costs (US$)

Item

PS3 (60GB version)

Xbox360 Elite

Motherboard, CPU, graphics processor, chipset, etc.

352

204

Optical disc drive/player

125

19.45

Hard disc drive

54

43

Power supply

37.50

25.50

Bluetooth, 802.11 b/g network modules

19.60

N/A

Other components

150.50

N/A

Chassis and related

61.75

25.25

Assembly

40

6.10

Total cost

840.35

323.30

Retail price USA

Retail price Australia $A

599

$995 

399

$495

Source: iSuppli, compiled by Digitimes, May 2007

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