Xbox One vs. PS4: Microsoft More Profit Per Console

November 24, 2013 Leave a comment

Xbox One vs. PS4: Microsoft More Profit Per Console

11/22/2013 05:40 PM EST

OTTAWA, — Microsoft comes out punching with a significant upgrade to the Xbox franchise console and a true competitor to Sony’s PS4 while delivering per-unit profits. TechInsights Teardown costing shows both companies can profit from sales of their gaming consoles this holiday season. In fact, they used many similar parts to optimize their investment in the next generation of gaming consoles. Though AMD came out as a big winner in the APU (integrated CPU and GPU), there are choice design differences around both the processor design and the use of memory in each device. The TechInsights bill of materials for the Microsoft Xbox One amounts to $331. Based on this — and when the estimated costs for the peripherals are included — TechInsights believes Microsoft will have a gross profit of approximately $100 per console sold. This is far better than the $43 Sony will make per complete unit.

Xbox-one-vs-PS4_TechInsights

Bill of materials cost comparison of TechInsights.Said Al Cowsky, TechInsights’ costing director:

At the console level, the Xbox One is $10 less expensive than the PS4. This is primarily due to a $23 memory premium on the PS4, but it is offset by an $11 cost premium on the Xbox One processor. The Xbox One also has 4GB eMMC NAND flash, making the nonvolatile category $3 higher for Xbox One, while the housings/mechanicals of the Xbox One add another $4 premium over the PS4.
The Xbox One also comes with a Kinect vision system in-box with an estimated cost of $39. This is more than made up for by the $100 list price premium. Likewise, PS4 has an optional vision system accessory available for a list price of $60 (unit not costed at this time).

Though Microsoft seems to have generated more profit per console, it remains to be seen how the devices will compare as developers invest in building radical new games for the powerful platforms. Nonetheless, this initial profitability places both suppliers on equal footing for the real revenue (and profits) promised through the sales of games and the online experience.

Filed under TMT Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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