It's no secret that the PlayStation 3's costs have been prohibitively high for Sony. Last year, the company's game division lost around $2.1 billion largely because of the price on PS3 components such as Cell processors and Blu-ray drives. It was estimated that each unit cost around $800 to make.

Now, however, according to Nikko Citigroup's Kota Ezawa (as reported by BusinessWeek), Sony's efforts to tweak the PS3's design and shrink certain chips has allowed the company to bring down the cost per console to about $400. That would mean that Sony is finally closer to breaking even, especially on the 40GB SKU that went on sale for $399 on time for the holiday season last year. The $399 model contains just two USB ports and has been stripped of the PS2 chip, thereby removing PS2 backwards compatibility.

Ezawa still expects the game division to lose $1.4 billion this fiscal year, but with costs continuing to come down and better software on the way (LittleBigPlanet, Metal Gear Solid 4), the PS3 would seem to be heading in the right direction. In addition, if Blu-ray does indeed win the format war, as it appears it will, then Sony will be able to eventually recoup that major investment as more and more consumers make the switch to high-definition televisions and movies.