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Getting All 1,700 Parts of the Xbox 360 to Market
Carl Bialik from the WSJ writes "Microsoft is hoping its Xbox 360 will further the company's goal to 'link the Web and entertainment of all forms in consumers' living rooms,' the Wall Street Journal reports, but 'one manufacturing misstep -- a shortage of graphics chips or a recalled hard drive -- could derail those ambitions and drag Microsoft's unprofitable videogame business even deeper into the red.' The WSJ traces the 1,700 parts that go into the device through the supply chain -- from two southern China factories, Rotterdam, and on to Toledo, Memphis, and ultimately, retailers in the U.S. -- and looks at what could go wrong along the way."
This is not a challenge unique to Microsoft, of course.
Any hardware manufacturer has to properly plan lead times and coordinate parts supplies. At the same time, parts obsolescence is a big challenge to any manufacturer. Every one of those thousands of parts needs to be tracked and if obsolescence is pending, a suitable replacement needs to be identified and validated.
So the article simply points out the obvious: the more complex a piece of hardware, the more can go wrong with the supply line.
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http://www.gloryhoundz.com/
That's right, we got the rights to all the components. That includes the CPU, wireless hardware, the bridges and even the GPU. So, if anyone along the way in the supply chain screws up by providing flakey hardware or limiting supply, we get a new supplier.
If you look at the Anandtech review where they disassemble the 360, you'll notice every component is branded with the Microsoft logo!
You're right. The XBox division has been turning a profit for 2 years. Unfortunately, net loss is still around $4 billion from 2001 to now. My understanding is they didn't even expect to see a net profit for any quarter until later. Given how much an XBox 360 is going to cost and how much it costs to make, it would seem that MS is still going to be dumping hardware in favor of trying to make up for it with game sales. So, I'd expect that hole to get bigger. But yea, they're probably post a net profit in some later quarter when hardware sales go down.
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But, here's an interesting misconception from the grandparent:
It seems so odd that they'd use their monopoly on desktop productivity software to try to build a videogame empire:
Microsoft isn't trying to make a video game empire. As has been stated many times, Microsoft is more interested in being a home electronics empire. The XBox was just a stepping stone, with support for games and DVD playing (two places in Sony's turf). The XBox 360 seems a further extension of that. And Microsoft's push to get its media format on both new generation video discs only further cements its long term survival. It wouldn't suprise me if Microsoft's long term goal is to take over one of the MPAA companies or to simply join. After all, what better way to form a long-term monopoly than to not only own the software for every system in use but also the content, in an information age?
In the end, the XBox is merely an experiment of diversification. If it doesn't work out, they'll try something else. One thing is for certain: they're going to make damn sure to use their $40 billion to get a good footing in some other industry. Growth in desktop (and even server, assuming they ever get higher penetration rates) computing is a dead-end street. The only way for Microsoft to survive in the long-term, and keep their stockholders happy, is to be involved in a variety of industries. If Microsoft's business practices weren't so scummy, I'd be trully excited about what sort of things Microsoft can do by embrace and extending all varities of otherwise unrelated activities.
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