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Speaking at the Tokyo Game Show, President and Group CEO of Sony Computer Entertainment Kazuo Hirai said that the company is planning production cost reductions of both the PS3 and the PSP consoles.

Hirai said the company is planning cost reduction measures to boost the expansion of the PSP platform. He also said cost reduction of PS3 hardware is one of the most important challenges for the Sony business and SCEI will further accelerate this effort.

He said the cost reduction efforts will include shrinking the chip size and reducing the number of components in the PS3.

According to BusinessWeek, the company is also now in talks with Toshiba to sell the factory in Nagasaki where the high-performance Cell chip that powers the PS3 is made. (Thoug Sony’s senior vice-president, Naofumi Hara, says no decision about the factory had been made.)

The sale could bring Sony an estimated windfall of $870 million, BusinessWeek reports, but in a best case scenario Toshiba’s expertise in production could mean a cheaper price on chips and thus a lower PS3 price tag for us.

Of course, here in Australia, we missed out on the price cut of the PS3 that US gamers received earlier this year, with the Australian arm of the company choosing to release a value-added PS3 bundle instead. So even if Sony is able to cut its production costs, it is yet to be seen whether Australian consumers will see a console price cut.

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