iSuppli: Reckoning the Xbox bill of materials

It’s not news that Microsoft and Sony don’t make money on console hardware, but iSupply have provided the exact figures in a ‘teardown’ analysis of the latest Xbox 360 console.

iSuppli: Reckoning the Xbox bill of materials

The research company calculates that Microsoft does indeed price the product well below the total bill-of-material (BOM) costs of the components.

Specifically, the total cost for the Xbox 360 Premium reaches $525, which is well above the retail price of $399.

Breaking that figure down, the ATI-built GPU costs an estimated $141 (or 26.9 per cent of the bill of materials), the custom microprocessor from IBM (a triple-core PowerPC that runs at 3.2GHz) costs $106 (20.2 per cent), and the 512MB of GDDR DRAM from Samsung accounts for another $65.

According to iSuppli, the SiS Southbridge chip costs an estimated $12 and other semiconductors and electronic components make up the remaining cost of the $370 motherboard.

‘It’s really not surprising for the initial cost of the console to approach or even exceed the retail price,’ said Andrew Rassweiler, manager of iSuppli’s Teardown Analysis Service. ‘The good news for Microsoft is that during the next year, improved yields for the IBM microprocessor and the ATI GPU should save at least $50 per unit, in addition to other cost reductions.’

So much for the costs, however, because iSuppli estimates the size of a new growth cycle in the games console market. It reports that after declining by 9.1 percent in 2005 to 28 million units, the new next-gen consoles will shift in nearly 40 million units in 2006.

‘A lot of people ask me which company will win in the video-game console market: Microsoft or Sony? I reply, “IBM”,’ said Chris Crotty, senior analyst for consumer electronics at iSuppli.

As well as IBM designing and co-manufacturing the microprocessor that powers the Xbox 360, the PlayStation 3 – when it arrives early in 2006 – will run on the Cell processor jointly developed by IBM, Sony and Toshiba and IBM. iSuppli states that Nintendo’s Revolution platform will also feature a custom IBM chip at its core.

You can read the full Xbox 360 teardown analysis on the iSuppli website.

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