Dropping the price $80 on Arcades (and price drops on the Pro and Elite models), one has to ask, can Microsoft be profitable while reducing their price by over 20% on the base model, and roghly 15% on the Premium/Pro and Elite?
Lets take a look at past statements regarding the history of the cost to build an Xbox 360:
1) At launch, the Xbox 360 costs approximately $525 in parts to make a unit - Roughly 24% over the price of a standard $399.99 USD Premium model.
2) By November 2006, that price, according to iSuppli had decreased by nearly 40% - From Approximately $525 per unit to $323.90 per unit for the Premium model, and under $280.00 for the HDD-Less Core model (which is now the Arcade).
3) Since then, Microsoft has made 2 major revisions to the Xbox 360, the 2nd heatsink , and the cost-cutting 65nm archatcture of the Falcon revision. According to DailyTech, the Falcon revision cut CPU manufacturing costs by 50%.
4) And most recently, the Jasper chipset, with the 65nm GPU archatecture began it's production run in early May. TG Daily reports later in the article that they expect the Jasper chipsets to launch this month (which interestingly enough, coencides with the 60GB model and the price drop, exactly like last year's price reduction).
Because of the steps Microsoft has taken to reduce cost on the production of the console, and maintain profitability, it is very likely that the Xbox 360 has seen major reductions in the cost to manufacture a Xbox 360 since the $280.30/$323.90 prices were used more than 18 months ago. Using Moore's Law , it is believable that the Xbox 360 has reduced it's price a further 35-50% from the November 2006 pricepoint, and could be manufactured for (after the Jasper reivsion) $140.15 to $182.19 before other cost considerations (such as cost of delivery) are applied. This would fit in perfectly with Microsoft's goal to be profitable with the Xbox 360, as costs should be lower, or just at, the price of sale to distributors and retailers.
Furthermore, it would also be in line with what Sony has done, reducing the price of the Playstaion 3 from over $700 to $400 since November 2006.
