Analyst Finds Microsoft Selling Xbox 360 At Loss

El Segundo-based iSuppli, a research firm focused on the electronics and semiconductor industry, has conducted a teardown of the new Microsoft Xbox 360 game controller and has found that the bill of materials (BOM) cost for the new device actually exceeds the retail price of the unit. According to iSuppli, the total BOM cost for the Xbox 360 Premium reaches $525, well above the retail price of $399. The major cost components of the Xbox 360 include the triple-core IBM 3.2Ghz PowerPC, at a cost of $106, and an ATI Technologies graphics processing unit (GPU) at $141, including embedded DRAM memory for the processor. iSuppli said that in the video game business, consoles are often marketed as loss leaders to obtain lucrative software and licensing fees. Next generation gaming consoles are expected to reach unit shipments of nearly 40 million units in 2006.