The combined materials and manufacturing cost of the PS3 is $806 for the model equipped with a 20-Gbyte hard disk drive (HDD) and $840 for the higher end 60-Gbyte HDD version, according to a preliminary estimate of expenses by iSuppli's teardown analysis service. This total doesn't include additional costs for elements including the controller, cables and packaging, the firm said.

Sony is offering the PS3s—scheduled to hit U.S. retail stores just after midnight Friday (Nov. 18) —at suggested retail prices of $499 for the 20-Gbyte model and $599 for the 60-Byte model. According to iSuppli's analysis, Sony is taking a loss of roughly $307 on the lower-end model and $241 on the higher end model.

PS3's nearest rival, the HDD-equipped Xbox 360 console form Microsoft Corp., has a manufacturing and materials total of $323, based on an updated estimate using costs in the fourth quarter, iSuppli said. This total is $76 less than the $399 suggested retail price of the Xbox 360, according to the firm.

iSuppli said the size of Sony's loss per unit is "remarkable," even for a gaming console. Given the loss it is taking on each unit, iSuppli said it is no surprise that Sony is steering consumers toward the higher-end model

iSuppli (El Segundo, Calif.) said its dissection concluded that the PS3 is "an engineering masterpiece," setting a new standard for computing price/performance, even considering that it is more expensive than Microsoft Corp.'s Xbox 360 gaming console.

"With the PlayStation 3, you are getting the performance of a supercomputer at the price of an entry-level PC," said Andrew Rassweiler, teardown services manager and senior analyst for iSuppli.

Rassweiler said the PS3 is so costly to produce mainly because of its "incredible" processing power. "If someone had shown me the PlayStation 3 motherboard from afar without telling me what it was, I would have assumed it was for a network switch or an enterprise server," he said.

 See part-by-part cost estimes