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DM235 on 03 May 2010
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Squilliam said:
nightsurge said:
The only part I don't agree with is his notion that the 360 redesign would only save $20-30... that's ridiculous. Shrinking both cpu and gpu and combining it into one chip alone would save them $50+. Then you have less materials per unit since it is shrunken down, no more memory card slots, etc. I expect the redesign to save MS close to $100 on production costs from the current model.

Its probably closer to $50-$70 per unit but you have to remember they have to pay royalties on every console they ship to the DVD forum, ATI and IBM. With ATI its big enough for them to mention on their financial report for end of financial year 2011.

Overall its:

  • Likely 4 1Gbit GDDR3 chips ~$8-12 savings
  • One chip vs two ~$15 direct material costs and testing given an estimated $5000 price per wafer and ~330 good chips per wafer.
  • Likely $10 savings on motherboard complexity, board tracing etc.
  • Likely $5 savings on the PSU
  • Increase of $5 on DVD-drive for being slim
  • Likely $10 savings on cooling.
  • Likely $5 savings on msic items like memory card slots.

Total: $50.

Additional: Probably a $15-20 or so savings on average warranty repair costs due to more reliable design.

Just a rough work through of the overall costs.

 

That just seems too high to me.  The arcade model was on sale a little while ago for $130, so I'm going to assume that this price is Microsoft's break-even point (I doubt they would have wanted to sell it at a loss, even if it was a limited promotion).

The retailer gets $5.  Packaging and shipping materials are $10.  The controller and cables cost at least $15.  That means the actual system costs about $100 to manufacture.  If they can save $50 to $70, that means they can make an XBox for $30 to $50, which just doesn't seem right.

Patcher's prediciton of a $20 to $30 savings seem much more believable, because that would mean they could manufacture a system for $70 to $80.

Even if my original assumption was wrong, and it costs Microsoft $150 for an arcade (this would be my upper limit), then the system itself would cost $120.  Again, a $50 to $70 savings (almost 50%) just doesn't seem right.

Once a system is "cheap", it gets harder and harder to reduce the price by any significant margin.

I fully expect Microsoft to announce at E3 that they will be selling an arcade slim + Natal for $180 to $200, and an elite slim + Natal for $280 to $300, and that they will still be able to make a profit from each unit sold.