Xbox One Costs Microsoft $471 to Manufacture

By | 2 years ago 

Earlier this month, the analysis firm of IHS revealed that given the parts contained within the PS4, the console likely cost Sony about $381 to manufacture. Factoring in packaging and other expenditures, that meant Sony was taking a loss on each console.

Not to be outdone, IHS has now gotten their hands on Microsoft’s Xbox One, which released this past Friday in North America and several other territories, and provided a detail breakdown of that console. And like Sony is with the PS4, it’s safe to reason Microsoft is taking a loss on their console as well.

According to IHS, the Xbox One likely costs Microsoft about $471 to manufacture, just $28 less than the console’s retail price. The firm reasons that raw parts cost Microsoft $457 to procure, and the console then costs about $14 to assemble.

It’s important to mention, however, that the Xbox One also comes with the Kinect camera, which IHS figures to account for around $75 of the Xbox One’s total manufacturing cost. The Kinect camera is a major reason the Xbox One retails for $100 more than the PS4.

Xbox One Part Breakdown

As far as raw parts go, the Xbox One’s AMD processor reportedly costs about $110, which is about $10 more than the PS4’s custom-built AMD processor. On the flip side, the Xbox One’s DDR3 RAM only costs about $60. By comparison, the PS4’s GDDR5 memory costs about $88. So, in the end Sony is paying a little bit more, and getting what some testers reason is a slightly more powerful machine.

As with the PS4, Microsoft will likely start to turn a profit on each console sold once a single game is purchased. And if that title is a digital game, then the manufacturing cost of the console is even further offset.

Similarly, considering most of the Xbox One’s parts are much less specialized, there is plenty of room for the console’s manufacturing price to come down. Whether that is in a year’s time or more is unclear, but one publisher thinks a price cut could be sooner rather than later.

With the Xbox One having moved 1 million units in its first 24 hours, Microsoft is likely pretty satisfied with the launch of their new next-gen console. Yet, this detailed breakdown shows that winning the console war with a competitive price point comes at its own price. Both Sony and Microsoft are cutting it close with their costs, and while that’s a give and take for them, it’s good for consumers.

Now that you know how much the Kinect costs to manufacture, are you hopeful Microsoft might offer an Xbox One SKU without the camera? Do you think it’s smart of Sony and Microsoft to create price points barely above their manufacturing costs?

Source: All Things D

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