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Xbox One costs $500 to buy, $471 to build

We’ve already heard about the rough parts and manufacturing cost for Sony’s PlayStation 4, and now we’ve got a similar teardown of Microsoft’s Xbox One revealing that the console, which retails for $499.99, carries a parts & labor cost of roughly $471. The cost breakdown, which comes from industry analysis firm IHS (via AllThingsD) covers everything that comes in the box when you purchase an Xbox One, including the console itself, the inseparable (from your purchase, at least) Kinect camera, the packed in headset and cables, and the newly redesigned controller.

Roughly $75 of the parts/labor cost belongs entirely to Kinect, a motion-sensing camera that is also fitted with a microphone array, speakers, and an IR blaster for issuing commands to your cable box. The controller costs another $15, the dreaded power brick is $25, and the rest of the non-console components, including the headset, add another $10. The entire package costs roughly $125 per console to put together.

This leaves the Xbox One machine itself, whose parts combine for a total cost of $332. The single biggest expense in that figure is the central brain of the console, a central processing unit (CPU) and graphics processing unit (GPU) combined into one chip that’s valued at $110. The other big parts cost inside the console is the memory, DDR3 chips from SK Hynix that cost around $60 per console.

Much like Sony and its PS4, the cost here is likely high enough that Microsoft is taking a loss on each console sold, once marketing and distribution costs are factored in. This is common in gaming world, with manufacturers cutting the retail pricing of core hardware down to the absolute minimum in order to encourage sales that, in turn, drive additional sales of more profitable software and accessories. The cost of the parts going into both consoles will come down over time, but that doesn’t mean each machine’s loss-leader status will change for Microsoft and Sony.

“Microsoft could eventually eke out a break-even scenario,” Andrew Rassweiler, the IHS analyst that reported on the teardowns of both machines, said in reference to the Xbox One. He adds, “But they’d probably use it as an opportunity to cut the retail price in hopes of selling more.” Not a new tactic for console manufacturers, as history has proven again and again. Head over to AllThingsD for centerfold-worthy shots of the Xbox One console and Kinect, post-teardown.

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