Sony has already managed to nearly break even on their console production cost versus retail prices, and now production costs on the PlayStation 3 are set to drop once again as IBM will soon move the console chip onto the company’s next-generation 45nm high-k process.

The new 45nm chip will use about 40 percent less power than its 65nm predecessor, meaning Sony can cut down on the amount of cooling required by the console, which in turn will make it cheaper to produce. Another major factor is the production yield. In a nutshell, a smaller die means a smaller, cheaper package and less rejected chips, making production more cost effective. The new Cell chip will likely contribute to a price cut at some point down the line, it's just a question of when.