IHS: Xbox One costs Microsoft $471 to build with console, Kinect and controller

Last week, the research firm IHS performed a teardown of Sony's PlayStation 4 and determined that the console cost $381 to build the console and controller. Today, the same firm released its findings from its Xbox One teardown to AllThingsD and it claims Microsoft's console costs $471 to build, along with its controller and Kinect sensor, for a product that Microsoft is selling for $499 in the U.S.

However, that's a much better margin than what Microsoft had with the Xbox 360. IHS claimed back in 2005 it cost $470 to make the $399 model with the 20 GB hard drive. As far as the Xbox One, IHS says the most expensive part is the CPU-GPU chip from AMD, which it claims costs $110, compared to the $100 chip inside the PS4.

The Kinect sensor cost $75, and the DDR3 memory cost $60. The console's external power brick cost $25 and other parts inside the retail box, including the headset, costs $10. IHS says that the whole thing costs $14 to assemble.

Microsoft later found a way to manufacture the Xbox 360 at a lower price and, as a result, the price of the console itself went down. That will likely happen with the Xbox One as well, but it remains to be seen when that will occur and if it will result in a price drop for the console.

Source: AllThingsD | Image via IHS

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So Ms is making $18 vs $18? And you get a Kinect with voice control and multitasking? Please don't say the PS4 is more powerful because in reality it isn't enough to make a difference plain and simple.

You're forgetting the $100 difference between the two that the consumer will see, which does matter. Me, I think I'm starting to lean towards the Xbox One personally, but I can easily see how the PS4 is an attraction to consumers.

I am not sure about these PS4/XB1 costs. Are the really considering how much it costs at huge volume? Or is it based on ebayer costs for a single component?

I'm getting tired of these stupid smart ass websites who claim how much its costs a company to make a product without taking any other things in consideration as mentioned above.

This is actually a very accurate assessment of the cost. Contrary to what most people think it does not cost a few dollars to make and iPhone. If it truly cost $300 to make then Microsoft would have matched Sony at the price of $400 so from that it is either very close to $400 or above for them to set the price at $500.

This is crap. of the shelves parts wont cost this much. However, it always cost each company spend Milions of dollors to build the first device then they make money out of it in a long run. I don't know how these dudes calculated it but If you consider to divide R&D and production cost for making console and seling it for a week or 2 that sounds about right. but parts... It shouldn't be more couple of hundred to collect those parts. maybe another hundred for the camera optics cause those are expensive. Max 300.

why would they not sell it at a loss? even if only 50% of people get gold, essentially they make up for the difference in game and multiplayer access sales. It seems really strange both MSFT and sony didn't go for the typical 100-200 dollar loss per console this time.

neonspark said,
why would they not sell it at a loss? even if only 50% of people get gold, essentially they make up for the difference in game and multiplayer access sales. It seems really strange both MSFT and sony didn't go for the typical 100-200 dollar loss per console this time.

because its selling out for profit?

spudtrooper said,

because its selling out for profit?


Also, Xbox LIVE and gaming were never enough for them to recoup their losses anyway.

neonspark said,
.....

This has me thinking that this console war will be supersceded quicker than the last.
I wouldn't expect a 10 year life out of either of these.

Some new breakthrough is going to happen in the near-term. Maybe around graphene, or some other material which will force these companies to create a new device ahead of schedule.

deadonthefloor said,

This has me thinking that this console war will be supersceded quicker than the last.
I wouldn't expect a 10 year life out of either of these.

Some new breakthrough is going to happen in the near-term. Maybe around graphene, or some other material which will force these companies to create a new device ahead of schedule.


Graphene will probably change everything in all electronic industries.

AWilliams87 said,

Graphene will probably change everything in all electronic industries.

Not within 10 years.. at least not at commodity level. Maybe pro-sumer (hate that word) level.

$25 for a power brick that needs active cooling to provide 20W of power in standby mode?
I'm not amused. My silent Home Theater room is gone.
And disabling the "Instant On" feature is not an option.

TheCyberKnight said,
$25 for a power brick that needs active cooling to provide 20W of power in standby mode?
I'm not amused. My silent Home Theater room is gone.
And disabling the "Instant On" feature is not an option.

i can't hear a single thing from my xb1.. its dead quiet

TheCyberKnight said,
$25 for a power brick that needs active cooling to provide 20W of power in standby mode?
I'm not amused. My silent Home Theater room is gone.
And disabling the "Instant On" feature is not an option.

It seems pretty silent to me...

TheCyberKnight said,
$25 for a power brick that needs active cooling to provide 20W of power in standby mode?
I'm not amused. My silent Home Theater room is gone.
And disabling the "Instant On" feature is not an option.

The thing is dead quiet. I had it in here next to me at work (it is quiet here) and I couldn't hear it. Even the drive was dead quiet.

So with Microsoft actually making money off of each console, I'm sure many people are thinking why didn't Microsoft shave off $50 or even $100 to make the console more palatable? While I don't think we will ever know the true reason, I'll give you one I suspect.

Supposedly MS is going to partner with cable/Satellite companies next year to offer subsidized Xbox Ones for subscribers with a 2 year contract from free to $199. Typically when companies sign large purchase agreements they want a reasonable discount/unit. By MS pricing the Xbox One at $500, they accomplish several things. 1) they establish a basis for what the discount rate will be for those bulk purchases by the cable companies. 2) Early adopters would pay a reasonable rate for their console and at $500, I personally think this is justified with all of the additional capabilities the users are getting compared to the market. 3) If they wish to reduce the price later in its life it will be easy to justify it. 4) Stock holders will be pleased with the announcements that right from the beginning, the Xbox One is profitable.

So this leads to how much will cable/satellite companies be willing to pay for a subsidized Xbox One? I think $350 - $450 is reasonable and having the retail box at $500 means they will be more inclined to accept the deal especially if they can get subscribers to Stay and pay possibly $99 for the console which they should be able to keep with certain subscription plans.

Time will tell, but I think we can expect to see the first of the announcements for these partnerships in q3 of 2014, possibly earlier. Its anyone's guess as to how many Xbox Ones the cable/satellite companies will move, but if rolled out world wide, it could be substantial.

Edited by Drewidian, Nov 26 2013, 5:31pm :

Drewidian said,
Supposedly MS is going to partner with cable/Satellite companies next year to offer subsidized Xbox Ones for subscribers

Yeah the same thing was said about Mediaroom but then IPTV operators didn't want to pay for 360s.

Then MS sold Mediaroom.

Drewidian said,
So with Microsoft actually making money off of each console, I'm sure many people are thinking why didn't Microsoft shave off $50 or even $100 to make the console more palatable? While I don't think we will ever know the true reason, I'll give you one I suspect.

Supposedly MS is going to partner with cable/Satellite companies next year to offer subsidized Xbox Ones for subscribers with a 2 year contract from free to $199. Typically when companies sign large purchase agreements they want a reasonable discount/unit. By MS pricing the Xbox One at $500, they accomplish several things. 1) they establish a basis for what the discount rate will be for those bulk purchases by the cable companies. 2) Early adopters would pay a reasonable rate for their console and at $500, I personally think this is justified with all of the additional capabilities the users are getting compared to the market. 3) If they wish to reduce the price later in its life it will be easy to justify it. 4) Stock holders will be pleased with the announcements that right from the beginning, the Xbox One is profitable.

So this leads to how much will cable/satellite companies be willing to pay for a subsidized Xbox One? I think $350 - $450 is reasonable and having the retail box at $500 means they will be more inclined to accept the deal especially if they can get subscribers to Stay and pay possibly $99 for the console which they should be able to keep with certain subscription plans.

Time will tell, but I think we can expect to see the first of the announcements for these partnerships in q3 of 2014, possibly earlier. Its anyone's guess as to how many Xbox Ones the cable/satellite companies will move, but if rolled out world wide, it could be substantial.


What I don't understand is if they're into the whole TV thing, why not release an Xbox TV set with the OS embedded? I would have easily purchased a 42' Xbox TV. Plus, the margins on TVs are better than consoles.

deadonthefloor said,
Then MS sold Mediaroom.

Part of the reason they didn't want to partner with MS on the 360 was because MS was in direct competition with those cable companies and it would have forced them to use their particular Media Room service. By selling Media room, those companies can use any technology they want and MS is free to work with any cable provider. Its why they didn't use cable cards or some proprietary technology. There are too many differing technologies out there to make a standard device that works with them all. Its also not nearly as responsive or had as good of a switching app experience as their standard cable boxes. MS made major changes to how their system works with the Xbox One and App switching is one of its bright spots. Also add Skype into the mix and they can offer that "Skype to Land Line/mobile" connectivity in a package with your cable.

DVRs costs those cable companies about the same amount as a Xbox One. MS has done a good job lining up relationships with Time Warner, AT&T, Comcast, Dish Network, and Verizon in the US, and Sky, Foxtel, and a number of others around the world. The 360 couldn't support all of the features that those cable/satellite companies wanted. Now those companies are on the ropes as they are loosing hundreds of thousands of subscribers each quarter. They NEED something like the Xbox One to retain and perhaps gain subscribers since they have tried almost every other trick in the book and have gotten nowhere. Time will tell, but from the articles I have read, it seems there is a better than 60% chance we will see those deals next year.

Edited by Drewidian, Nov 26 2013, 6:19pm :

AWilliams87 said,
......

Easy answer.

Why compete with TV manufacturers ?

The television has a long and sordid history. Attempting to even compete in that space is a non-starter.

The cadence at which people replace entertainment components isn't in lock step.

I'll be in the market for a new TV next year. If MS bundled the device onto the tv, a la Samsung SMART, then I wouldn't have an XBOX One right now.

The TV is just a display.

How are those "smart tvs" selling in the market these days? do people actually think of the consumption experience as being provided by the set, or through some other service offering like AppleTV, chromecast, xbox, cablebox, etc?

Personally I'm of the latter, because I can swap those devices in and out at will, whereas, I'll never buy a smartTV as I do not want the vendor to stop supporting my set before the end of its useful life.

Drewidian said,
.....

Almost.

Uverse is Mediaroom (now Ericsson). They had xbox360 as a STB (sans PVR).
Optik from Telus (canada) was using the natively installed STB OS, which booted up off the HDD just like a game. Unfortunately that required a service tech to install the STB software on the console via disc drive.

Then a few dashboard updates later, and they killed that option when launching the new app platform. Guess what, mediaroom guys were there too, and offered a sample app that some operators turned into a service. The app platform expression also allowed non-IP based providers to surface their OTT content on the device.


I'll just go ahead and throw another product in the mix here.

Media Center. Media Center was supposed to support CableCard natively and that never materialized. Media Center also supports Mediaroom natively, but no telcos released that due to content license holder restrictions amongst other reasons.

Microsoft's entire approach toward becoming the dominant living room box has been troublesome at best.

Maybe this is the right approach. Afterall, they've tried just about every other combination, leaving many customers in their wake grasping at straws for replacement functionality.

deadonthefloor said,

Easy answer.

Why compete with TV manufacturers ?

The television has a long and sordid history. Attempting to even compete in that space is a non-starter.

The cadence at which people replace entertainment components isn't in lock step.

I'll be in the market for a new TV next year. If MS bundled the device onto the tv, a la Samsung SMART, then I wouldn't have an XBOX One right now.

The TV is just a display.

How are those "smart tvs" selling in the market these days? do people actually think of the consumption experience as being provided by the set, or through some other service offering like AppleTV, chromecast, xbox, cablebox, etc?

Personally I'm of the latter, because I can swap those devices in and out at will, whereas, I'll never buy a smartTV as I do not want the vendor to stop supporting my set before the end of its useful life.


Well I meant sell them in conjunction with the normal console. The TV market, IMO, is still better than the console market as there are better margins, albeit still low. I think a Xbox TV set, with an integrated kinect as well, would have taken off. The support problem is really an issue with certain manufacturers. I could be wrong, but I think it would have been a great idea; at least better than how the current Xbox came out imo.

AWilliams87 said,

What I don't understand is if they're into the whole TV thing, why not release an Xbox TV set with the OS embedded? I would have easily purchased a 42' Xbox TV. Plus, the margins on TVs are better than consoles.

Baby steps my friend. Baby steps. So.. there is another rumor going around as well which centers around how to add The Xbox One experience to other rooms that don't need the gaming, but just want to watch TV. Its been suggested that an Apple TV like Xbox One lite will come that does the TV and Apps, but not the gaming. It won't have a Blueray Player either, and there's speculation that there might be two models; one with Kinect and one without. This version of the OS could be embedded into TVs as well and a Kinect sensor added to the TV to support that functionality, but it won't have the gaming capabilities. Again supposedly in late 2014 or even 2015.

As far as the Xbox One, IHS says the most expensive part is the CPU-GPU chip from AMD, which it claims costs $110, compared to the $100 chip inside the PS4.

Yet the PS4 GPU is faster one? Did Microsoft got ripped off by AMD or were they not able to negotiate a better deal on that part?

sanke1 said,

Yet the PS4 GPU is faster one? Did Microsoft got ripped off by AMD or were they not able to negotiate a better deal on that part?


Xbox has static RAM embedded on CPU die. The PS4 does not.

Sounds like MS made a bad decision. The PS4 SoC + RAM costs $188. The Xbox one SoC + RAM costs $170. So for only $18 more, the PS4 has much faster ram and a much faster GPU.

AWilliams87 said,

Xbox has static RAM embedded on CPU die. The PS4 does not.

Very self assuring but doesn't change the fact that PS4 was still cheaper at the same time faster.

What happens when that giant dust filter gets clogged? They should have a self cleaning mode, where the fans go full throttle in the opposite direction for 5 seconds to blow all the dust off the filter.

That would be amazing, you would see a this HUGE poof / cloud of dust come out the top of your Xbox one!

Take it out side, and use the leaf blower to clean it.

warwagon said,
What happens when that giant dust filter gets clogged? They should have a self cleaning mode, where the fans go full throttle in the opposite direction for 5 seconds to blow all the dust off the filter.

That would be amazing, you would see a this HUGE poof of dust come out the top of your Xbox one!

I rather not to have the dirt blowing back into my room. All electronics are full of dirt after period of time. Every month, I am taking out all my computers outside and use the leaf blower to clean dirt of them. You will be amazed how dirty they are. After that, the computers are clean as new.

Seems very fair. There are also operational costs and activities such as marketing to consider as well. No way they are making a profit on this. It will be a few years before they do make a profit.

Ezekiel Carsella said,
Glad to see they are making money on it smart move. Still wish you could do more without XBL

Actually, when you factor in logistics and administration cost, R&D, marketing, taxes, they're actually losing money. A 5% gross profit margin really isn't enough for the net income to be positive.

DixieNormus said,
Actually, when you factor in the child labor they are making money.

I believe the labor costs of $14 consider who's assembling the consoles... And Foxcon has been in trouble for a lot of things, but I've never seen them employ children...