via digitimes

With Microsoft's Xbox 360 and Sony's PlayStation 3 (PS3) new-generation game consoles priced below their component costs, the game console vendors are aggressively preparing to migrate chief components to 65nm production in order to help shrink the gap between retail prices and costs.

During a recent Sony investor conference, the company said it has already started production of various sized chipsets on 65nm node and noted that die-size could be shrunk by 40% in comparison to 90nm process, indicating that corresponding costs could be reduced along with the reduction in die-size. In addition to the prepared migration to more advanced node production, Sony said it also plans to reduce the number of parts in the PS3 in attempt to see "drastic" cost reductions.

iSuppli's research shows that, at present, manufacturing costs of the two PS3 models 20GB and 60GB-hard disk drive (HDD) are US$306.85 and US$241.35 higher than the current retail prices.

Another component teardown report from iSuppli reveals that Microsoft is also facing a similar situation. According to the research firm's estimation, the Xbox 360 Premium package which is priced at US$399, actually houses a bill-of-material (BOM) cost of US$525. A spokesperson at Microsoft previously told Business Week that profits from Xbox 360 should only start being realized in 2007.

Microsoft and its foundry partner, Chartered Semiconductor announced last April that it would start producing Xbox 360 CPUs on 65nm silicon-on-Insulator (SOI) technology in the first quarter of 2007. However, later rumors have suggested that the migration might be delayed to mid-year.

A Chinese-language Commercial Times report February 2, 2007 cited industry makers commenting that Microsoft could shrink the cost of three key Xbox 360 components CPU, northbridge and graphics chip to below US$150, or 30-40% lower, if it introduces 65nm manufacturing.