It's common for console makers to sell their new systems at a loss, banking instead on software sales to make up for the losses. At the Xbox 360's launch last year, Microsoft was estimated to have lost around US$ 125 per console. Nintendo, however, has traditionally sold its consoles at a profit, with the upcoming Wii continuing this practice.

Last month, Sony revealed that its game division expects to lose ¥ 200 billion (US$ 1.7 billion) this year due primarily to expenses associated with the company's new PS3 console. An in-depth analysis of the next-gen console shows that materials and manufacturing costs for the system amount to US$ 805.85 and US$ 840.35 for the 20GB and 60GB version, respectively.

According to electronics supply chain researcher iSuppli, analysis shows that Sony loses US$ 306.85 per 20GB hard-drive equipped PS3 sold. This amount is greater than what Sony loses on the 60GB PS3, which has a US$ 241.35 difference between the cost and retail price. These losses do not include the packaging, cables, and the cost of the SIXAXIS controller.

iSuppli said that while the size of Sony’s loss per console sold is "remarkable, even for the videogame console business," the components within are all highly impressive pieces of electronics, including the US$ 129 RSX graphics chip from Nvidia and IBM's US$ 89 Cell processor.

"The reason why the PlayStation 3 is so costly to produce is because it has incredible processing power," explained Andrew Rassweiler, teardown services manager and senior analyst at iSuppli. "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."

Overall, iSuppli called the PS3 a "great bargain," saying the console has "more processing power and capability than any consumer electronics device in history."