It depends. One of the biggest cost contributor the the PS3 was the Bluray diode. Which cost upwards of $130 thanks to it's pathetic 10% initial yield. (And this has dropped by $100 according to Sony, if you choose to believe them)
Costs of the Cell processor is even more interesting. Modern processors still cost relatively little to manufacture (we're talking a few dollars) but take HUGE amounts of money in R&D as they get more and more complex. That's why volume will cut into CPU prices more than other components that are more material / process dependent. If a CPU takes a billion dollars to develop, it's a sunk cost regardless of how many sells.
I believe they can afford a cut to $400 in 2008, but it's really a game of give and take. Will the money you lose now be worth it in the future? Clearly the lower prices in Japan isn't helping, so they might not be so quick to drop prices despite sluggish sales.
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