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Xbox One costs $471 to make - Report

Xbox One costs $471 to make - Report

Tue 26 Nov 2013 8:52pm GMT / 3:52pm EST / 12:52pm PST
Hardware

IHS teardown suggests that Microsoft, like Sony, is roughly breaking even on its new hardware

The Xbox One costs gamers $499 to buy, and it costs Microsoft nearly that much to make. That's according to AllThingsD, which was given an early look at a teardown report of the system from research firm IHS.

All told, the firm estimates that each Xbox One costs Microsoft $471 in parts and manufacturing, compared to the $381 it pegged as Sony's PS4 costs. But where Sony's expenditures mainly went to the CPU and memory, Microsoft's top-dollar components were the CPU and Kinect camera. The AMD microprocessor at the heart of the Xbox One was estimated to be about $110 with "at least" $75 devoted to the Kinect motion-sensing camera. Microsoft also opted for older, less costly memory than Sony did, so the Xbox One chips cost about $60, compared to the $88 Sony is believed to spend on each PS4's memory.

While it makes it difficult for Microsoft to turn a profit on the hardware after shipping and retailers take their cut, that cost of materials is still a significant improvement over the last generation. Shortly after the Xbox 360 launched, an iSuppli teardown put Microsoft's cost at $525 for the premium model of the hardware, which retailed for $399.

16 Comments

Steven Hodgson
Programmer

77 120 1.6
I remember a previous article saying that the Kinect costs as much as the console. So that means its about $240 without. It's a shame that it was a forced bundle, that kind of price difference would probably have tipped the scales a lot. That being said, you don't want to make it too cheap, otherwise people will think they're losing out on something.

Edited 1 times. Last edit by Steven Hodgson on 27th November 2013 4:29pm

Posted:7 months ago

#1
Make the NSA Kinect optional :) EZ win!

Posted:7 months ago

#2

Brian Smith
Artist

194 78 0.4
Maybe they could develop some other gadget thats just the kinect speech mic, then bundle that with a cheaper version of the machine. At least you'd still get o/s speech driven features. Then again I don't have one so I don't know if thats workable.

When they are so insistant on pushing the kinect tech to every user they should have just taken a bigger hit on their sale price. It would still have been less of a giveaway than last gen was for them. Plus, if the machines don't all break like the last ones then it would still make a lot more money.

Maybe the NSA could subsidize it. Sign away your privacy and get kinect for free.

Posted:7 months ago

#3

Aleksi Ranta
Product Manager - Hardware

268 123 0.5
They Should really have done away with kinect as a forced tie-in and subsidise the console even more to drive transactions through their store and harmonize the purchases more, buy Angry birds on your phone and get it for free on Win8 and Xbox. Make more money in the long run with more Live members, Office365 and so on.

And like said above, why didnt they just have Kinect voice recognition for logging in and commands, and have the stripped down version 75-100Eur cheaper?

Posted:7 months ago

#4

Dusty Welch
CEO and Founder

3 0 0.0
As reported in the Financial Times, this is likely a contributing factor to the Board's interest in divesting the gaming division from the rest of the org. The mobile subsidies comprise ~85% of the net margin of the parent.

Posted:7 months ago

#5

Bruce Everiss
Marketing Consultant

1,692 594 0.4
The whole PS4 and Xbone businesses are incredibly fragile.
Huge bets with limited value to the consumer and no competitive advantage.

Posted:7 months ago

#6

Jim Webb
Executive Editor/Community Director

2,232 2,161 1.0
What exactly is a competitive advantage these days aside from exclusive software?

Posted:7 months ago

#7

Mats Holm
Technical Process Analyst

53 37 0.7
Popular Comment
I love how everyone here is all "they should have made Kinect optional' when the Kinect launched it was optional and everyone was "If it does not come in the box, people will never use it."

Posted:7 months ago

#8

Barrie Tingle
Live Producer

351 116 0.3
Adding Kinect is a brave move by Microsoft. This way game developers know what they have available to them and can make game features accordingly. Previously it was "Kinect might be there so we'll put in a "throw grenade" command". I hardly used the Kinect on my Xbox 360 but I have to say, I use it constantly on the Xbox One. I disabled it for chat because no one needs to hear my home conversations while gaming but the voice commands are excellent and responsive, even with my Yorkshire accent.

One standard console SKU is better for everyone in the long run, anyone that worked with the 360 and the lack of knowing you had a HDD to work with will know better.

Posted:7 months ago

#9

Bruce Everiss
Marketing Consultant

1,692 594 0.4
@ Jim Webb
What exactly is a competitive advantage these days aside from exclusive software?
Precisely the problem as any MBA will tell you.

Posted:7 months ago

#10

Adam Campbell
Associate Producer

1,136 914 0.8
I love how everyone here is all "they should have made Kinect optional' when the Kinect launched it was optional and everyone was "If it does not come in the box, people will never use it."
Obviously, as part of the system you can boost its usage and adoption by game developers. That does make it more desirable to customers who are interested, as it means more games or features using Kinect.

Problem is, for customers who are NOT interested, you're at a loss, because you're still being forced to have a device you have no intention of using, when you could have had an Xbox that beat the PS4 on price. This is likely to be the majority of people buying one of these new systems.

Because Microsoft believe so much in both the capabilities and the hype of their own peripheral, they have made a massive gamble forcing it upon users, to an extent where it was almost mandatory for the console to work. Now its not, the Kinect is still there with no choice for the consumer.

Edited 2 times. Last edit by Adam Campbell on 27th November 2013 10:43pm

Posted:7 months ago

#11

Robin Clarke
Producer

295 679 2.3
Every analyst's 'teardown' of a console's manufacturing cost is a complete guess.

1. List price of components
2. ????? (The deals the manufacturer has actually struck, assuming they are even stuck to)
3. Profit !

@Mats Holm: Those aren't contradictory positions. Kinect brings nothing to games. The Faustian pact MS have made to put their whole platform in hock to advertisers makes Sony's determination to push through Blu-Ray last gen look almost shrewd by comparison.

Posted:7 months ago

#12
Many years later I still fail to see the kniection. If there was a singular awesome game that utilized the Kinect to its potential, great. Alas i fear its only when VR options are more mainstream that kinect can come into its own. So, still a few years away...

Posted:7 months ago

#13

Neow Shau Jin
Studying Bachelor in Computer Science

42 53 1.3
@Bruce

Huge bets: definitely, this is sector for companies that takes risks, else Samsung and Apple would have enter it a long time ago
Limited value to the customer: this is rather subjective, because it boils down to: "is playing video games your hobby"?
no competitive advantage: it's safe to say these 2 companies view each other as competition, and each have a edge over the other. It can go either way by now. This is also associated with "Huge bets".

Posted:7 months ago

#14

David Serrano
Freelancer

298 270 0.9
This is exactly why I don't believe Microsoft's claim that they don't plan to sell or share any of the data collected through Kinect. While I have absolutely no evidence to support it, I strongly suspect the Kinect was integrated into the base system for one purpose: to create a highly lucrative analytics profit center to offset R&D and hardware manufacturing costs.

Posted:7 months ago

#15

Alfonso Sexto
Lead Tester

765 574 0.8
@Mats

That is true, but I believe that follows the little interest of MS costumers in the casual orientation of it. Forcing it was also a bad idea.

@Bruce
"Huge bets with limited value to the consumer"
Consumer wants a gaming platform and consumer gets one. Questions?

Posted:7 months ago

#16

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