The Xbox Series X cost to manufacture will be roughly $500 according to an industry analyst, giving us a hint as to what Microsoft’s newest console might cost when it goes on the market. However, the actual retail price of this upcoming gaming system might not be what you think.
Niko Partners Senior Analyst Daniel Ahmad talked about the cost to make both the PlayStation 5 and Xbox Series X in a series of tweets, emphasizing a very real problem that both Sony and Microsoft are going to have in this coming generation: how can they price their consoles well and turn a profit?
“Struggling to see how PS5 / Series X can launch [sub-$400] given preliminary [Bill of Materials] for known specs,” he began. “The CPU/GPU, GDDR6 Memory and NVMe SSD alone would be well above 50% of both the build price and a $400 retail price. It’s either take a heavy loss, or price appropriately above $400[.]”
For the sake of context, a “bill of materials” is simply a list of all the various components that are used to make something. In the cast of the Xbox Series X, the components are pretty pricey, meaning that it might struggle to get under a $400 price point in terms of manufacturing cost.
“Right now I’m expecting the bill of materials + manufacturing cost for a Series X console to come in around the $460 to $520 mark,” he added, emphasizing that this is not the retail price.
Struggling to see how PS5 / Series X can launch sub $400 given preliminary BOM for known specs.
The CPU/GPU, GDDR6 Memory and NVMe SSD alone would be well above 50% of both the build price and a $400 retail price.
It's either take a heavy loss, or price appropriately above $400
— Daniel Ahmad (@ZhugeEX) December 19, 2019
The Xbox Series X cost, while important, is only one part of the bigger picture. A key thing to consider is just how much of a loss Microsoft is willing to take on each unit.
Traditionally, both Sony and Microsoft have sold their gaming consoles for less than they actually cost to manufacture, making up for the loss with people purchasing games, subscriptions, and other digital content. (Nintendo, for their part, usually sells at a profit.) However, both companies likely want to avoid the debacle of a $599 price tag like they had with the PS3, a situation that Sony President Shuhei Yoshida called “horrifying”.
Based on Mr. Ahmad’s estimates, the Xbox Series X cost to manufacture will be $460–$520. How that affects the retail price (and how much Microsoft is willing to lose per unit) is something that we’ll surely find out over the coming year.