news\ Nov 26, 2013 at 9:58 am

Xbox One reportedly costs $471 to build

Xbox One

Following the teardown of the PlayStation 4, research firm IHS has taken apart the Xbox One to determine how much it costs to build. AllThingsD got a sneak peak of the teardown, revealing the combined cost of parts and manufacturing for the Xbox One -- console, Kinect, and controller included -- totals $471, or about $90 more than the PS4 costs to build.

IHS figures the Kinect motion-sensor peripheral, which comes bundled with the Xbox One, costs at least $75. It's believed the Kinect has much to do with the Xbox One's heftier price tag ($499 for the Xbox One versus $399 for the PS4); although, IHS analyst Andrew Rasswiler found that the biggest cost is the microprocessor from chipmaker Advanced Micro Devices. The microprocessor in the Xbox One is a combination of a CPU and a graphics-processing unit (GPU) and is believed to cost $110, or about $10 more than the similar AMD chip in the PS4.

“They’re both very powerful chips,” Rassweiler told AllThingsD. He noted that they are both built on the same 28-nanometer design, and basically provide all of the computing power of the console. “You might call them a gaming console on a chip,” he added.

Microsoft did save some money on its memory. While the PS4 uses the GDDR5 memory chips, the Xbox One contains the more common and less costly DDR3 memory. The Xbox One memory figures to cost $60, or $28 less than the PS4.

Other parts used to assemble the console -- not including the Kinect, controller, or anything else -- total $332, Rassweiler estimated. The controller, he figures, costs about $15. The external power supply costs about $25, while other in-box contents like the headset cost about $10. The console itself costs about $14 to assemble.

At a retail price of $499, the cost of parts and manufacturing leaves Microsoft in a break-even scenario, at best. Microsoft is likely hoping that the sales of individual games and reduction of manufacturing costs will eventually lead to profits over time. Microsoft is estimated to lose as much as $1 billion this year on the Xbox One, taking into account research and development as well as sales and marketing costs.

"Microsoft could eventually eke out a break-even scenario,” Rassweiler added. “But they’d probably use it as an opportunity to cut the retail price in hopes of selling more."

So it seems that Microsoft won't necessarily turn a profit from direct Xbox One console sales, despite the system costing $100 more than the PS4. Many believe that by offering a Kinect-free Xbox One, Microsoft could lower the console to a more competitive price with the PS4. Microsoft, however, has said it will not sell the Xbox One without the Kinect included.

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