But they’ll make it up in volume

A report from Merrill Lynch estimates that the Sony PlayStation 3 will cost as much as $900 to manufacture. But Sony will need to heavily discount the console to compete with the $400 Xbox 360. The PS3 might also be delayed by several months while Sony tries to complete standards for the Blu-ray DVD drive.

Merrill Lynch speculated in a research note last week that the debut of the PS3 could be postponed as much as six to 12 months, with an autumn launch in Japan and a late 2006 or early 2007 launch in the United States, and that the cost to manufacture the game console might be as high as $900 apiece.