Microsoft Looks To Cut Xbox Costs

Thanks to an anonymous reader for pointing to The Register's article on Microsoft's resolution to reduce the cost of goods sold in its Xbox division. This news is a byproduct of Steve Ballmer's recent internal Microsoft memo urging greater competitiveness, but the article elaborates a little - "Microsoft makes a significant loss - thought to be over $150 - on each Xbox console it sells... significant steps have already been made in slashing Xbox production costs, including moving manufacturing to China from Hungary, and replacing some components with cheaper alternatives." But this is about reducing Microsoft's financial loss per console, not reducing the amount the consumer pays, so, as the article indicates, "..further [Xbox] price cuts seem unlikely in the near future."

Comments

Curses! Foiled again!

[More Karma Than God]

Now M$ will lose less money once I build my Beowulf cluster of Xboxes!

"Made in China"

[Makoss]

Now it the good stuff!

So They've Had Cheaper Components?

[portege00]

What I'm wondering about is what came along in the last three years that made such a significant cost reduction as to merit moving manufacturing facilities to Hungary? Couldn't they have just used the cheaper components in the beginning and cut costs?

Re:So They've Had Cheaper Components?

[Ataru]

They've moved from Hungary to China.

Re:So They've Had Cheaper Components?

[PainKilleR-CE]

While chips and drives have come down in the last two years, you really haven't seen a significant decrease in the cost of 700MHz CPUs and 8GB hard drives, because neither was cutting-edge at the time. The 700MHz CPUs probably are only being manufactured for MS, both because they are not the same as the off-the-shelf 700MHz P3 that people might have bought a couple years ago, and because they simply aren't producing chips that far from their highest clock-cycles. There might still be a few companies producing 8 GB hard drives, but frankly, most of them aren't even producing platters that small any more (and I wouldn't be surprised if the XBox hard drives had larger platters than they are using, at least in the newer ones). Hell, I haven't bought a hard drive that small in almost 5 years. The graphics chip is a special build as well, though it's possible that nVidia is still producing comparable chips for the general market.

A lot of it comes down to the more common components, like IDE controllers, USB, and so on. The RAM in the system has probably come down in price as well. Other than that, they could've found a more efficient manufacturing process, or some chips that helped make it more efficient. Reducing the size and/or number of layers of the backplane would usually help in the long term, as well.

Hmm...

[Mmm coffee]

$150 per console loss and now they're trying to lower the price? They must be getting desperate after having their asses handed to them by Sony and Nintendo. I know that their long term goal is to stream content via the X-Box and gain their monopoly in the living room that way, and were expecting to have to slowly inch their way into the market. Them winning this battle in the long term is a significant part of their plans. But looking at their growing loss per console margins I don't believe that they expected to lose to Sony as hard as they have. As odd as it sounds I think Sony is one of their greatest hurdles to overcome before they gain domination of the living room.

Looking at the PS3 specifications I believe that there's no way in hell MS will be able to even close to Sony. Until broadband gets common enough for MS to use their streaming content plans to dominate the market, I think Sony is going to be giving a merciless beating. But once they start streaming content I have a feeling that they'll start to nudge Sony off to the side. That's when they'll be able to flex their monopolistic muscles at full power.

The PS4/X-Box 3 battle is going to be very interesting, methinks.

Re:Hmm...

[cuyler]

$150 per console loss and now they're trying to lower the price? They must be getting desperate after having...

Close by wrong. They are trying to reduce the cost of producing the X-Box, not reducing the cost to the comsumer (ie. they'll loose less money).

Read the last two sentences of the article.

Sony, Nintendo, ... can SUE ms in Belgium now!

[Void]

If this is true, and MS confirms this, then Sony, Nintendo, ... anyone making game consoles can sue MS over this in Belgium. In our law, it is illegal to sell anything with a loss if you _know_ you are selling with loss the moment you sell it. (There are some exceptions for special sales, but not much!) So if Sony, Nintendo want to sue ... file a complaint in Belgium!

Money

[clu76]

Microsoft doubled their loss on the Xbox this past year, losing $190 million before taxes. But I'm faily sure that Microsoft more than made up for this loss in their other divisions.

Sony made a profit of $964 million for the fiscal year. "Sony (SNE) shares are down 40 percent this year, following declines of 8 percent in 2002, 35 percent in 2001 and 51 percent in 2000. "

Nintendo made a profit of $553 million. Their shares are also down, at around 35%. Not bad considering the competition.

Re:Money

[burns210]

Microsoft went into the console market with 2 billion dollars set iside... they said "ok, we got 2 billion, buy a cool console and sell it to as many people as possible, we can make money later"... the plan worked, and they are number 2 in the game market.

X-laptop

[angryflute]

I've wondered, have they considered going to a laptop motherboard manufacturer to make the innards of the Xbox?

I never understood why the Xbox's design seems to be that of a PC scaled down, when it seems like it would make more sense to design it as a laptop minus the LCD screen. It would also greatly reduce the size of the Xbox. Laptops today have processors well over 1GB, and on-board 3D graphics chipsets that are just as good as the Xbox's.

Or is it just too expensive to manufacture the Xbox this way?

Re:X-laptop

[RzUpAnmsCwrds]

No, but seriously changing the hardware design would break quite a few games. The only thing that they could probably do safely would be to switch to a NForce2 chipset board with a custom IGP (it needs to support shaders at least as well as the GeForce3.5 in the XBox). The XBox is actually quite similar to the NForce platform.

Screwing Microsoft

[Man In Black]

"Microsoft makes a significant loss - thought to be over $150 - on each Xbox console it sells..."

Hmm... maybe I should buy one after all >:)