XBOX360 Production Cost Breakdown

[Geo]

http://www.xbitlabs.com/news/multimedia/display/20061120132150.html

Microsoft Corp., the world’s leading maker of software, is earning money selling the Xbox 360 hardware, according to updated teardown analysis from research firm iSuppli. The information means that the software giant has managed to lower the price of its latest game console by nearly 40% in one year.

Okay, iSuppli just shot their credibility with me. 40%? When the 65nm shrink hasn't happened yet? No way.

 

[Tahir2]

PS3 costs $40.00 to manufacture and XBOX360 costs only $6.10.

Why the difference? Does ASUSTEK charge a premium for putting together PS3's and whoever MS is using do it for virtually nothing?

PS I am getting weird messages on that link on in this page.. anyone else getting any "errorsafe" system message?

 

[Graham]

Manufacture costs will no doubt reduce significantly as production scales up, and from what I can tell, the PS3 has far, *far* more individual parts.

compare:

360 with the lid off.
PS3 with it's multiple lids off.

Heck the cooling system in the 3 (while very impressive) almost looks as complex the entire 360

 

[Skrying]

Interesting. The 360 looks very straightforward, where as the PS3 looks really complicated (why?). Not sure how much difference it would make, but the 360 gives me the impressions that its production is almost entirely spent with a machine while the PS3 would need a lot more human work.

 

[Acert93]

Okay, iSuppli just shot their credibility with me. 40%? When the 65nm shrink hasn't happened yet? No way.

Seems unlike, especially since just recently Toms Hardware (TGDaily) had a news peice stating that the 360 is MORE expensive to manufacture now compared to in 2005. Could be MS blowing smoke or TG getting their facts wrong, but at the end of the day a 40% in reduction and no major cost reduction measures (like die shrinks) seems very unlikely unless yields were HORRIBLE last year and GDDR3 700MHz has significantly dropped in cost as well.

 

[LunchBox]

That's a big drop if that holds true.

 

[Platon]

I for sure don't think that it has been dropped as much, on the ohter hand I don't really get why it should cost more to produce now than before etiher...

 

[Graham]

I thought a while back MS stated they had been renegotiating their component and manufacturing prices, and while they were cheaper they would not mean a consumer price cut (or to that effect).
Or has my memory gone and inverted itself again?

 

[Tahir2]

Speaking of memory, prices have increased substantially over the last few months and this affects everyone.

 

[Gubbi]

Speaking of memory, prices have increased substantially over the last few months and this affects everyone.

I'm fairly certain that both Sony and MS has very long running contracts on memory so they won't be influenced by volatility in the memory market in general.

Cheers

 

[Rangers]

Seems unlike, especially since just recently Toms Hardware (TGDaily) had a news peice stating that the 360 is MORE expensive to manufacture now compared to in 2005. Could be MS blowing smoke or TG getting their facts wrong, but at the end of the day a 40% in reduction and no major cost reduction measures (like die shrinks) seems very unlikely unless yields were HORRIBLE last year and GDDR3 700MHz has significantly dropped in cost as well.

Umm, that article is nonsense, and I have no idea of their source.

It sounds like they just got it off one of microsofts recent quarterly earnings statements, where they tend to say things like "operating losses in the division increased due to greater Xbox360 sales". Of course, that tells you nothing about unit price.

I have no idea what an 360 costs, but it's common sense that the cost would be declining, with or without process shrinks. In fact, I dont haqve the article but I know it was posted on B3d, that they said they were ahead of their targets on cost reducing the 360 recently.
________
big women Webcam

 

[Geo]

I'm fairly certain that both Sony and MS has very long running contracts on memory so they won't be influenced by volatility in the memory market in general.

Cheers

Not just memory, either. Almost certainly the HDD too. And while they probably have some step-down built into them for specific time frames over the life of the deal, it seems highly unlikely to me that it'd be enough to get into 40% territory in the first year. For one thing, those prices are already pretty low predicated on the long-term nature and high volume of the deal. These aren't juicy high-margin deals we're talking about.

 

[Acert93]

Umm, that article is nonsense, and I have no idea of their source.

The TGDaily article basis their information on MS's recent quarterly report:

Microsoft said that its Xbox and PC game revenue increased $319 million, which is an increase of 107% over its fiscal Q1 2006 quarter. The overall operating loss of the Entertainment Devices division decreased, but was offset by a $268 million increase in cost of revenue related to a number of factors, such as "increased sales and marketing expenses related to recent and upcoming product launches including Xbox 360 and PC games, and increased development costs associated with new and upcoming products, including Zune." The company stated that the cost of revenue was "driven" by higher shipments of Xbox 360 units, increasing cost of its online services as well as "higher Xbox 360 unit costs." Especially the higher Xbox 360 unit cost is surprising, as the business model of game consoles tends to be at least partially based on decreasing unit costs over the lifetime of a device.

but it's common sense that the cost would be declining

That is is what they said as well

Especially the higher Xbox 360 unit cost is surprising, as the business model of game consoles tends to be at least partially based on decreasing unit costs over the lifetime of a device

 

[scooby_dooby]

That TG article has to be taken with ahuge grain of salt, they are simply extrapolating based on very vague comments from MS.

I'd bet you dollar to donuts that the increased losses are the majority of the first few million consoles (sold in Nov - April) coming back under warrantee and needing to be replaced.

 

[jb]

I for sure don't think that it has been dropped as much, on the ohter hand I don't really get why it should cost more to produce now than before etiher...

My first job at Moto fresh out of school was to work with the factory to make our products cheaper. We spent lots of money and time figuring out how to make things for a lower cost then when the first unit rolled off the line. We did this through many factors some of which included: better supply chain (can leverage volume, changing suppliers), slight re-design to make the product easier to build, changes to the build line itself (new process that are more efficent for the works, new equipment, faster/better testing methods at EOL, change the componets used in the line) and the fact that longer you make something the easier it is to make. Some of these are not big hitters as far a cost reduction goes, but they tend to add up over time.