@ mztazmz
The iSupply report only stated PS3 Components costed $850 around launch. If correct you still have to build the console and add a lot of additional marketing, R&D, support, retailer share, etc, costs.
That's why the PS3 is really an amazing deal for consumers in terms of provided technology / retail price ratio. It's really a console build for the future. If they were produced and sold as fast as the Nintendo Wii it would have put Sony in danger as a company, IMO that's an important reason why it's good that the most anticipated PS2 sequels haven't hit early within the PS3's lifecycle and Sony experimented mainly with introducing new franchises until the costs ratios are more favourable. This also provides more time to adapt legacy game engines for the new technology.
Some components drop in cost quickly, however other components drop in cost slowly.
