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The iSuppli Xbox 360 Teardown Highlights IBM’s Dominance in Next-Generation Consoles
El Segundo, Calif., Nov. 22, 2005 – IBM and Microsoft Corp. once teamed up to dominate the PC market—but can they make history repeat itself in the video-game console business?
A dissection of Microsoft’s new Xbox 360 Premium video-game console conducted by iSuppli Corp.’s Teardown Analysis Service indicates that IBM silicon is a key factor driving the cost and functionality of the product.
Beyond the Xbox 360, IBM chips are also at the heart of two other next-generation game consoles set to hit the market in the coming months. Thus, while it’s too early to say whether Microsoft’s Xbox 360 will prevail in the gaming market, IBM is a sure winner in consoles due to its across-the-board design wins.
“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. The Sony Corp. PlayStation 3, due for launch in early 2006, will utilize the new Cell processor jointly developed by Sony, Toshiba and IBM. Nintendo’s Revolution platform will also feature a custom IBM chip at its core.
IBM designed and co-manufactures the custom microprocessor that powers the Xbox 360. The microprocessor is a triple-core PowerPC that runs at a frequency of 3.2GHz. At a cost of $106, this single part accounts for 20.2 percent of the total Bill-of-Materials (BOM) cost for the Xbox 360 Premium, according to preliminary findings from the iSuppli Teardown Analysis Service.
Design highlights
The IBM chip and other integrated circuits in the Xbox 360 total an estimated $340 per console.
Other key semiconductors in the Xbox 360 include the Graphics Processing Unit (GPU), the memory and a Southbridge I/O controller. The GPU, designed by ATI Technologies to provide groundbreaking High-Definition (HD) graphics, costs an estimated $141, including embedded DRAM from NEC. This makes the ATI GPU the single most expensive component in the Xbox 360, exceeding even the cost of the microprocessor.
The main memory, 512Mbytes of GDDR DRAM from Samsung Electronics Co. Ltd., accounts for another $65 of the BOM. The SiS Southbridge chip costs an estimated $12. Other semiconductors and electronic components make up the remaining cost of the $370 motherboard.
The figure below and attached presents the BOM breakdown for the Xbox 360 in U.S. dollars.
The Xbox 360’s exploding BOM
Factoring in costs for the hard disk, the DVD drive, enclosures, the Radio Frequency (RF) receiver board, power supply, wireless controller, cables, literature, and packaging – the total BOM cost for the Xbox 360 Premium reaches $525, well above the retail price of $399. The high BOM cost for the Xbox 360 is not unusual. In the video-game business, equipment producers often market games consoles as loss leaders for more lucrative software and licensing fees.
“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, Rassweiler added.
Video-Game console market expands
The other good news is that the Xbox 360, which was officially launched at Midnight on Nov. 21, marks the start of a new growth cycle within the video-game console market. After declining by 9.1 percent in 2005 to 28 million units, the introduction of the next-generation consoles will cause the market to boom to reach nearly 40 million units in 2006, not including handheld game players, iSuppli predicts.
The figure below and attached presents iSuppli’s video-game console forecast.
About iSuppli's Teardown Analysis Service
The iSuppli teardown analysis of Microsoft’s Xbox 360 Premium costs $1,299 and includes a complete BOM, cost data, photos and descriptions of key components. Similar reports are also available for other key consumer electronics devices including the new video-capable iPod, the iPod nano and the Slingbox.
The Teardown Analysis service from iSuppli provides comprehensive, detailed analyses of electronic devices such as mobile phones, digital cameras, PDAs and PCs by performing complete teardowns. iSuppli delivers a complete assessment of all electronic, electromechanical, and mechanical components, examining both pricing and design issues.
For more press information, please contact:
Jonathan Cassell
Editorial Director and Manager, Public Relations
iSuppli Corporation
Office: 408.654.1714
Mobile: 408.921.3754
www.isuppli.com
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