Xbox One S teardown sees "significant value gains," parts cost $324

It's now been nearly a week since Microsoft officially launched the brand new Xbox One S 2TB Launch Edition in select markets, and we have now a clearer understanding of what's new inside Microsoft's latest gaming console. Microsoft’s senior director of product marketing and planning Albert Penello recently revealed several details about the Xbox One S SoC and the new hardware that enables support for HDR and 4K video play back, and the folks over at iFixit also tore down the console and gave it a 8 out of 10 rating in repairability.

But that's not all, as information services company IHS Markit has also released a deep analysis of the Xbox One S manufacturing costs last week (via Windows Central) According to the company, the combined hardware and manufacturing costs of the 2TB Xbox One S amount to $324, which is $24 more than the previous 1TB Xbox One model that the company also analyzed in March of this year. As the new Xbox One S is currently sold for $399 in the US, Microsoft would get a $74.99 margin on each console sale. Kevin Keller, the senior principal analyst for IHS Markit who oversaw the teardown analysis explained:

It is typical in consumer electronics to adopt a ‘give away the razor, sell the blade model’ when a product is initially introduced -- particularly in the gaming sector -- given that buyers are also expected to purchase new games to play on the devices. Even in this case, while not completely upside-down, margins are still slim once you consider all of the downstream value-add.

Microsoft 2TB Xbox One S teardown analysis (credit: IHS Markit).
Microsoft 2TB Xbox One S teardown analysis (credit: IHS Markit).

The new Xbox One custom 16nm SoC is among the few cost-additive factors in the console components as IHS Markit reports that it costs around $99 ($23 more than the previous model), along with the UHD Blu-Ray player which was assessed at $32 versus $18 for the previous model. However, Microsoft managed to save costs on other hardware parts as the new console is more energy-efficient and also has a smaller enclosure.

The Xbox One S has been better designed to save some costs (credit: IHS Markit).
The Xbox One S has been better designed to save some costs (credit: IHS Markit).

“As the production of this device matures, and as yields rise, we can expect commensurate cost erosion,” Keller explained, which will help Microsoft increase its margins. We invite you to read IHS Markit's full teardown analysis over here and to let us know what do you think of these numbers in the comments.

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