Microsoft To Lose $1B This Year On xBox One Which Costs A$100 More To Build Than PS4

Written by David Richards     27/11/2013 | 08:23 | Category: INDUSTRY

In the past it was Sony who had the most expensive gaming console when it came to build costs, now the mantle has switched to Microsoft and their Xbox One with build research revealing that the Microsoft offering costs A$100 more to build than the PlayStation 4. It's also estimated that Microsoft will lose more than $1Billion this year selling their Xbox One.

Microsoft To Lose $1B This Year On xBox One Which Costs A$100 More To Build Than PS4

IHS research claims that the combined cost of parts and manufacturing for the Xbox One including the console, the Kinect and the controller comes in at US$471 which is US$90 more than the cost of Sony's PS4.

$75 of that cost is derived from the Kinect motion-sensing add-on that comes bundled with the console. (The PS4 has nothing comparable in its box.)

The biggest cost driver inside the Xbox console, said Andrew Rassweiler, the IHS analyst who led the teardown team, is the microprocessor from chipmaker Advanced Micro Devices.

All Things Digital claims that like a similar AMD-made chip found inside the PS4, this one is a combination of a CPU and a graphics-processing unit (GPU) that handles gaming graphics.
The estimated cost for this component is $110 which is $10 more than the AMD chip found in the PS4 - it's also the single most expensive component in the system.

"They're both very powerful chips," Rassweiler said, noting that they are built on the same 28-nanometer design technology, and that they essentially provide all of the computing power of the console. "You might call them a gaming console on a chip," he said.

ATD said that the other major silicon inside the Xbox One is the memory. Unlike the PS4, which used higher-end GDDR5 memory chips, the Xbox One contains older - more common and less costly - DDR3 memory. Memory chips came from SK Hynix, and added about $60 to the cost, or about $28 less than what's found in the PS4.

The parts used to assemble the console itself cost $332, Rassweiler estimated, that the other items add about $139 to the cost. The controller costs about $15, and contains Wi-Fi and Bluetooth components from Marvell Technology.

The Kinect includes chips from Samsung and STMicroelectronics, which supplied an image-processing chip. There's also a chip that emits "visible and infrared light," the maker of which hasn't yet been identified, Rassweiler said. "We're a little mystified by that one."

The external power supply costs about $25, and other box contents, including the headset, cost about $10. It costs about $14 to assemble.

Component manufacturer Texas Instruments, has six parts in the Xbox One: Four in the main console, and two more inside the Kinect. All six are dedicated to managing power.

 ON Semiconductor supplied four power-management components.

Rick Sherlund, an analyst with Nomura Securities, has estimated that Microsoft is likely to lose as much as $1 billion this year on the Xbox One, after accounting for research and development plus sales and marketing costs.

Typically with videogame systems such as this, the cost of the components does come down, and newer and less-costly components get swapped in over the product's lifetime. This will give Microsoft the chance to improve the Xbox One and, if history is any judge, to trim the price incrementally over the next several years.
That's how it went with prior versions of both the Xbox and the Playstation, Rassweiler said. "Microsoft could eventually eke out a break-even scenario," he said. "But they'd probably use it as an opportunity to cut the retail price in hopes of selling more," he said.
With that, here's an exploded view of the Kinect (both images were taken by IHS):