Betting the farm: Xbox 360 costs $715 to build?

by Christopher Grant on Dec 28th 2005 6:00PM

This can be filed under "D" for dubious, but according to Ala Shiban on HardwareHell the Xbox 360 costs far more than the previously believed $525. Receiving his info from a "high ranking friend at IBM... that worked on the Xbox 360 chip design" Shiban claims he was told each system cost approximately $715 to manufacture. If true, that's a loss of over $300 per console. On the other hand, the source of the news is questionable: a "friend" who worked on the chip design? How would he know how much Microsoft is spending on all the other elements that comprise a video game console? What about the GPU, the memory, the DVD drives, the hard drive, the chipset, the controllers, the assembly, packaging, marketing, and shipping of each console?

Read

Reader Comments (4)

Assuming this $300/console loss figure is true, this means if they planned on selling 3 million by the first of the year, that's a $900 million loss just in 2005 alone. Assuming they make $20 profit per game, that means each xbox 360 purchaser would have to buy 15 games in order for them to break even!

Yea but they make alot of their money on accessories e.g. $100 wireless thing. Xbox Marketplace and Live are both good money making machines too.

Regardless of how effective the accessories are at raking in the dough (and at $50/controller, MS certainly are trying to) a $300 loss/console can not be sustained. Well, it *could* be sustained since they have 40 billion in cash reserves, but if they intend to make the Xbox division profitable there will either have to be massive cost-cutting measures or this story is bull. I vote for the latter.

ok. it may have cost 700$ to make, but by the time you kno what to make, its ust the matter of making a machine, that will make those chips for 2$ a piece. think about it, a pound of alluminium, a pound of steel, a pound plastic... whatever they use to make chips, a pound of will make ALOT of chips. a normal size chip doesnt come close to a pound. also, after u put in a billion dollars into making machines that make the 360, put them on the market, youll make all of your profit and more after a month, MAX. then theirs always supplies, and paying the guys on the line, and blah blah blah.... i et microsoft make atleast 90$ profit off every 360 with hardrives, BEFOR they get to a middle man (blockbuster)

sorry sir/mam, but your friend is either stupid, he lied, or he doesnt kno all his facts.