In light of the negative PSV threads undoubtedly tied to the uninspiring retail performance of the platform, there have been calls for everything from immediate price drop to ceasing the platform altogether in response.

Popular impressions among the platform's detractors seem to be that the hardware costs too much to produce while simultaneously being priced to high for consumers. So, a really quick check on the bill of materials for the PS Vita was quite enlightening. 

The wireless card carries all sorts of chips, including the Qualcomm MDM6200 HSPA+ supporting speeds up to 14.4Mb/s (that data rate is available Japan, while US Vita owners are limited to AT&T's 3G HSPA 7.2Mb/s network according to PCWorld). These specs are in line with those previously reported by UBM TechInsights, which performed a teardown late last month and priced the Vita's bill of materials at roughly $159.10:

• Display and touchscreens: $50
• Battery: $3.60
• Cameras: $3.50
• Wi-Fi/BT/GPS: $3.50
• NAND: $6.00
• SDRAM: $9.25
• Processor: $16.00
• BB+XCR: $16.25
• Non-electronic: $11.00
• Other: $30.00
• Supporting materials: $10.00

http://www.ubmtechinsights.com/teardowns/sony-playstation-vita-teardown/?pi_campaign_id=13825

Quite a bit lower than I had expected. I think my original guestimate was closer to $200 way back when, just based upon smartphone BoMs. Just under $200 I think I said if I remember correctly. 

Contrast the facts with early projections from a year ago that the PSV would cost 2-3 times over the estimated BoM and priced accordingly while still being sold at a loss by SCE and what you have is the reality that a lot of people making such projections (who are admittedly not professionals in field) simply have little to no idea what it actually costs to produce the hardware being sold at retail. 

Does this mean SCE can sell the base PS Vita at $199 without taking a significant loss on each unit sold? Not exactly, since the base model can't depend upon additional charged services beyond PSN game/DD sales and the 3G service units seem to be both limited in sales as well as in actual subscribers (and again considering that AT&T provides the service and presumably receives the vast majority of the 3G service revenue). Official PSV peripherals (cases, chargers, etc.) are natural profit makers, as are the much maligned proprietary memory cards (more profitable than any other peripheral), but ultiimately, SCE really needs to be making a profit on each hardware unit sold until the software revenue (based upon installed userbase) is large enough to be the primary source of revenue for the platform. 

But what it does mean is that SCE does have considerably more room when it comes to retail pricing that just about everyone who bothered to make a PSV prediction made before actual BoM estimates were performed. 

When it comes to pricing hardware, it always pays to say "wait for industry BoM estimates on final retail units" before making wild, uneducated claims about what something will cost and what the company producing it can sell it for. 

PSV is making a nice profit for Sony with them games, 3G model and memorycards.

Now factor in production, marketing and R&D costs among other costs.

The 3DS was found back at launch to cost less than $100 in terms of materials, yet at $170 it's selling at a loss and will continue to do so supposedly until August. That in itself should be a strong indicator that the cost of the materials of a platform isn't an adequate measure in discerning as to whether it is profitable.

Also those opting for the Vita to be discontinued after 2million units being sold after being on the market worldwide for a period of about 3 months now, are probably the same individuals that claimed the 3DS was doomed to fail and that the handheld market is dead.

R&D costs are done and paid for. Every quarter that passes with R&D personnel on project (and I believe the PSV had been in development dating back to at least 2008, probably earlier) go down in the books as quarterly expenses. It's not like new projects build up some sort of bill paid for on credit that has to be paid off once the product ships.

The marketing budget was actually fairly low keyed in terms of expenditures which may just reflect the importance (or rather lack of) the PSV has for SCE's immediate and long term plans. Not exactly confidence inspiring, but many are of the notion that it's the games rather than the hardware that should ultimately be advertised, and until those compelling titles are available, there's no sense in spending even more to promote that which is not yet available, even if that approach did pay off massively for MS and Kinect. Regardless, whatever SCE spends on marketing does go into the cost of every unit sold at retail, which is yet another reason why it makes little sense to sell at cost, or at a loss, even when that business model has worked in the past.

But one has to acknowledge there is a massive difference between selling a piece of hardware with a BoM of $159 for $299 versus a BoM of $840 for every PS3 sold at $599 on launch.

That's less than I would have figured to be honest. From the way the media paints the Vita, you'd think it the cost of materials was at least $250. But that's how the media wants to make people perceive things.

What do you mean I can turn this rock into gold without throwing money at it?

still losing money on each vita sold http://andriasang.com/comw7e/vita_loss/ 

No! Read the Reuters article that this article got its info from. Kaz says "turn a profit within three years of the body of the Vita sales". That does not mean that the Vita isn't selling for profit now and won't for 3 years. It means that in 3 years they expect the Vita to have brought in more money than it cost to make. That includes manufacturing, R&D, advertising, etc. 

Haven't I corrected you on this before or are you another victim of miscommunication created by terrible article writters on the internet.

Re-read his post, maybe you will understand it the second or third time.

It seems like there is possibly room for a $199 price point (which you explained).

They should release a Vita bundled with a 4gb card for $199 and keep that price for 3 years. Phase out the 4gb card and make the 8gb $20, 16gb $40, and the 32gb $70.

And finally, most importantly, keep a steady stream of new releases.

P.S. Give early adopters a free SCE game on PSN