Kinect Only Costs $56 to Make

[Greg Tito]

Kinect Only Costs $56 to Make

Technicians at UBM TechInsights took apart Microsoft's Kinect unit and determined that all of its parts are only worth a little under a third of the retail price.

UBM TechInsights is a firm that breaks down electronics into its components and figures out a Bill of Materials or BOM of how much each of those components costs. UBM then writes a detailed "teardown report" and sells that information for a hefty price to tech firms to get a sense of what competitors are up to. It's all standard business practice, but the findings from UBM's teardown report on Kinect is raising a lot of eyebrows. Kinect is on sale in many stores for $149.99 right now, but UBM believes that the chips, cameras and microphones in the unit cost a grand total of $56. For those of you wondering and are too lazy to subtract on your own, that's a profit of $93.99 for every Kinect that's sold.

Allan Yogasingam from UBM did praise the technology of the Kinect, especially the components provided by Isreali chipmaker PrimeSense, from which $17 of the $56 is attributed. "Basically, the strength of the design is the huge design win for the Israeli fabless company PrimeSense," he said. "They've provided the most innovative portion of the Kinect with their image processor, audio and video interface."

The report also noted that Kinect has far-reaching applications. "The future applications of this technology could be fascinating," Yogasingam said. "I can see this being incorporated into televisions - allowing users to chang the channel by waving their hand, essentially replacing the remote control."

It's worth noting that the $149.99 price tag also goes towards developing the technology and manufacturing it, not to mention the loss leader [http://www.escapistmagazine.com/news/view/104479-Microsoft-Spending-400-Million-on-Kinect-Launch]?

Well, I guess you get Kinect Adventures! bundled with it too. Yay! That's totally worth the 90 bones. Nevermind. My bad.

Source: EE Times [http://www.eetimes.com/electronics-news/4210649/Kinect-s-BOM-roughly--56--teardown-finds-]


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[Exort]

I think they know what loss leader is. I mean they even sell xbox low than the cost to produce it.

 

[SomeLameStuff]

Jeez, $90 profit per unit? If they're bringing in THAT much, surely they can afford to price it lower.

 

[Direwolf750]

goddamn. hell with that.

 

[kouriichi]

Maybe if they didnt spend... oh... i dont know.... $400 MILLION DOLLARS just to market it, they wouldent have to price it so high.

But thats just me.

 

[Gigaguy64]

Ok, i saw this and i laughed.
HARD.

 

[DayDark]

holy fuck, I'm planning on buying a kinect, but knowing that, I feel microsoft is kinecting with my ass.

 

[cabalistics]

What about research costs, advertising, shipping, game development? all these things must be paid for too

 

[bdcjacko]

Are they factoring in the cost of research and development? Are they factoring in marketing? Are they factoring in failed projects that are expensed against the successes?

DVDs only cost pennys to form, and maybe a dollar more to encode and maybe after packaging a whole $3 to make and bring to the consumer, but they cost $20 retail, that is nearly $17 profit before you factor in all the other cost of making movies.

 

[SaturdayS]

That's a decent price for M$. Generally a rule of thumb is to mark something up 4x to cover your losses. Consider the price difference between products/materials for shampoo, toothpaste, audio cables, and descent restaurants. This price is nothing to complain about.

... But still I'd like it to be cheaper.

 

[bdcjacko]

My point was more of, cost of materials =/= final cost to company.

 

[AfterAscon]

All because they're selling each unit for a profit doesn't mean they'll ever break even. Also, please see: Price skimming [http://en.wikipedia.org/wiki/Price_skimming]

 

[KEM10]

This just mean that the price will lower to $100 after about a year and maybe $75 by the summer after. Can someone look up how much the XBox itself costs parts wise, or a PS3. I know I saved a few hundred by building a computer. The unit costs 3-4 times what the parts are worth, common knowledge.

 

[vxicepickxv]

The system the Kinect attaches to is a loss leader, so yes, Redmond has head of loss leaders. I think one of them was Windows ME.

 

[Snax]

Are they factoring in the cost of research and development? Are they factoring in marketing? Are they factoring in failed projects that are expensed against the successes?

DVDs only cost pennys to form, and maybe a dollar more to encode and maybe after packaging a whole $3 to make and bring to the consumer, but they cost $20 retail, that is nearly $17 profit before you factor in all the other cost of making movies.

This is true enough, but the difference here is that you don't buy a DVD for the physical disk, but rather you buy it for the image n the disk, However you buy the Kinect purely for the hardware as the software is another cost (when I say software I mean games, obviously). Microsoft's profit is meant to come from licensing fees from the games, not from the hardware cost.....

Of course, I'm not disagreeing that the Kinect probably costs more than the sum of it'
s parts due to other issues and dev costs, but 2/3 of the price seems a little steep for dev costs. Either way my room is too small to buy one.

 

[TheTygerfire]

For that cost you can't even knock $25 off? Asses.

 

[WittyInfidel]

Yeah, it's cheap to make, considering it's mostly plastic. What you can't see are all the lines of code and man-hours spent writing said code. Then the marketing, shipping, ect.

It all adds up in the end.

Here's another way to look at it: That $15 dollar CD you just bought only cost 30 cents to make.

 

[health-bar]

charging over 100% actual worth for a product?

this has been happening for a while now.