The Wii U will be sold at a loss

[JEMC]

Soundwave said:

I suspect one reason why the Wii U costs so much is Nintendo's insistence on such a small casing and low power draw.

Probably requires a lot of customization and specific speciality parts. My guess is most of their R&D is actually spent on making sure the console is small too, lol. I hope it's worth it to them. 

They likely could have had a more powerful console for the same price if they were willing to compromise on that or embrace a model whereby they release smaller/more power efficient models over time.

Yes and no.

The R&D is more expensive, but when it comes to making the bits it is cheaper (maybe not from the very beginning but soon enough).

Look at the MCM, the chip with both the CPU and GPU. As Nintendo said in the Iwata Ask about the console, going with a combined die with both chips ment more work and troubles, making the development more expensive. But when the manufacturing starts it's cheaper because you "only" have to buy 3 parts instead of 4 and during the manufacturing process is only 1 chip to be installed instead of 2, making it faster and therefore cheaper .

Also making the console smaller makes them save money in the long run. Small and simple case = cheaper (just a few cents, but we are talking about millions of consoles), but it also makes shipping costs go down. That's why we see revisions that are smaller than the original models.