Wii cost broken down
by David Hinkle 
{ Dec 14th 2006 at 12:55PM }
A poster by the name of DefectiveReject over at NeoGAF clues us all in to an interesting factoid: the Wii costs $158 bills to manufacture, not including the Wiimote and nunchuk). These guys take the spotlight to the console, shining its bright light into the various nooks and crannies of the system to find the total value of each of its parts, finally coming up with cost calculations for each component. Turns out, according to their findings, Nintendo is making around $40 bucks a console. Way to go Nintendo ...- Graphics chip: $29.60
- CPU: $13.00
- DRAM: $7.80
- Optical disk drive: $31.00
- Power supply: $11.30
- Manufacturing cost: $19.50
- Cost total: $158.30
- Wholesale price: $195.99
[Via NeoGAF]
Reader Comments (Page 1 of 1)
Shawn @ Dec 14th 2006 1:19PM
Excluding the Wii Mote, Nunchuck, Wii Sports, distribution costs, marketing costs, among many other costs. I am sure once all is said and done, they are not making a profit (or a very slim one) on the system (with the pack-ins). They are probably really banking on software and accessories.
Nushio @ Dec 14th 2006 1:22PM
Ripping off your customers: Priceless
Sorry, couldnt resist ;)
Loban @ Dec 14th 2006 1:25PM
Making a profit does not mean they're ripping off the customer. Now if they were charging $500 for the Wii, that would be ripping us off.
Enzo @ Dec 14th 2006 1:35PM
Yeah, this doesn't take into account everything else that's in the box for $250. Keep in mind the wiimote/nunchuck combo is $60 on it's own, and wii sports is $50 on it's own in japan (or is it cheaper? I dunno)
Stupid post.
20XX @ Dec 14th 2006 1:43PM
That actually seems like a really slim profit margin for Nintendo.
For the other companies, though, it would be a windfall.
20XX @ Dec 14th 2006 1:43PM
And the fact that Wii Sports costs $50 in Japan doesn't mean that it costs $50 to produce Wii Sports; nor does it mean that Wii Sports is worth $50.
SpeZek @ Dec 19th 2006 1:34PM
Um...if I remember correctly, the Wii does not have Dram, it had 1TSRAM or something like that, which raised production costs a lot.
Bogus?
epobirs @ Dec 14th 2006 1:51PM
#7
The device in question is filling the role of DRAM in the system. That it carries a particular brand name and special attributes is beside the point in measuring its cost to Nintendo. If the people who created the breakdown are at all competent, they will have gotten some estimate of the cost of using the MoSys product.
epobirs @ Dec 14th 2006 1:56PM
So far as the bill of materials is concerned, the Wii-mote and nunchuk attachment adds no more than $15 to the package. Yes, there is a very good profit margin for buying additional controllers at retail but much of that goes to the retailer, who needs some compensation for carrying the consoles at little to no profit. (Don't forget the slightly lower retail price of the Wii in Japan.)
After all is said and done, Nintendo is not raking in the bucks on the base hardware sales. In this day and age, just selling a console without taking a loss is a big accomplishment, especially when that console is selling fast as it can be delivered to the stores.
BPM? @ Dec 14th 2006 2:04PM
I don't see a cost listed for Wii's internal flash memory or wireless module...
Jackson Pritt @ Dec 14th 2006 2:10PM
#9,
Do you mean $15 just in parts, or in parts/labor?
I'm guessing that for a remote/chuck combo you're looking at a lot more like $30 in parts and labor. Also, are these NeoGAF numbers based on CONSUMER prices of these items, or wholesale prices?
I dunno, I was under the impression that Ninty had a higher profit margin on these things...
GMan @ Dec 14th 2006 2:11PM
I think this just demonstrates that $200 may have been an unrealistic price for consumers to pay, even though that's what we all wanted.
Not included in this breakdown are:
- Packaging
- Manuals
- Video cable
- Sensor bar
- Sensor bar stand
- Adhesive tape
- Wii Remote
- Nunchuck
- Console stand
- Vertical stabilizer stand
- Wii Sports
Let's assume that "manufacturing cost" is simply putting everything together into a sellable box.
Does this list then include fans, heatsinks, cables, thermal compound, the Wii enclosure itself into the balance? I also don't see shipping costs.
Let's not touch marketing, because it's debatable whether any company includes that as part of the cost equation when they sell the hardware. But everything that you could possibly get in or on the box must be bought and shipped by Nintendo, at cost to them. The things I've listed aren't necessarily substantial - but I'll bet they eat into that ~$40 margin pretty quickly.
If you add the PS3 column, it comes to $596.50, yet they have 805.85 written down. It's all sorts of weird. We already know that NA retails make about $3 profit from a PS3 sale and about $13 from a Wii sale. I just don't see this information fitting together with anything.
What do you think?
Enzo @ Dec 14th 2006 2:35PM
"And the fact that Wii Sports costs $50 in Japan doesn't mean that it costs $50 to produce Wii Sports; nor does it mean that Wii Sports is worth $50."
Your opinion doesn't change anything, the game still sells for $50, and it's in the package. Sure, it doesn't cost $50 to make, but that's what you would spend otherwise, whether you think it's "worth it" or not.
Gozan @ Dec 14th 2006 5:06PM
PS-fanboyism is PS-fanboyism, even in Japanese...
r-deezy @ Dec 14th 2006 3:59PM
Does anyone know how Nintendo is shipping these?? Cause if they're using a 40' container (by water) then shipping costs are too marginal to even be considered as a significant cost addition... probably less than 50 cents per console.
The 40' container (assuming that is what is being used) should cost no more than $10,000. I would estimate they can fit around 50k consoles on there... that's 20 cents per console.
Algernon @ Dec 14th 2006 4:22PM
#14
nintendo has stated that they are using boats, planes, trains, and everything else they can to try and meet their 4 million mark by the end of the year. I doubt they are only going to use boats, that is just way too slow for them to transport 4 million units in a few months to everywhere in the world
derfreddy.de @ Dec 14th 2006 6:00PM
13: this is about production costs.. and wii sports was produced too
15: plus many cities cant be reached by boat
r-deezy @ Dec 14th 2006 6:29PM
HAH... sorry, it'll probably fit closer to 5000 units (not 50k!). Which'll add at least a couple bucks per console. And the $10,000 per boat load is to the final destination regardless if the city is on the coast line or not (approximation based from Asia to US... probably cheaper for Europe).
Kai @ Dec 14th 2006 7:35PM
@ Nushio
>2. Ripping off your customers: Priceless
>
>Sorry, couldnt resist ;)
How can you rip off your customers if they are falling over themselves to get your product at whatever price you offer?
NManiac @ Dec 15th 2006 1:44PM
I'm half surprised actually. Remember all of these speculations about a 200 $ launch price? I think it was Reggie himself who said they had to raise the prices a bit in order to satisfy the retaillers. And they did say they will make profit on the console from day one. So yeah. Not surprising.
Lectoid @ Dec 14th 2006 9:59PM
No one even mentioned development. Before you say it's a gamecube 1.5. Nintendo had to pay those people that worked on it for the last 4 years or so. Now they need to recoup that cost.
Inspired @ Dec 15th 2006 1:11AM
Of course Wii Sports didn't cost $50 to make. It costs at least a hundred thousand in development ;)
ouj @ Dec 15th 2006 7:43AM
"How can you rip off your customers if they are falling over themselves to get your product at whatever price you offer?"
By the same reasoning (huge demand despite the price) you must also agree that Sony isn't really ripping people off with PS3?
I find it absolutely amazing that Nintendo gets praised for selling completely outdated six year old hardware for profit and Sony is fucking evil for selling cutting-edge hardware for a huge loss.
(no, I am not going to cough up $600 for a PS3 at this time - Xbox 360 is easily the best next-gen offering at the moment)
Smoke @ Dec 15th 2006 10:17AM
It's absolutely amazing that people still claim Nintendo's selling "outdated hardware" even though the CPU and GPU are pretty much brand new and custom-designed, they're just based on older hardware. You're not simply looking at GC hardware running at a higher speed here, there's also added instructions and the cores themselves have been made smaller.
By that same note, you can claim the 360 runs on outdated hardware(PowerPC dates back to the early 90s), and PCs have been running outdated hardware for years(x86 dates back to the late 70s)
Also, I'm still wondering why a company making profit on their key products is a bad idea and they should sell at a loss.
More on topic: The price on the graphics chip is quite interesting because it's comparably high, pointing towards a bunch of new features inside that we haven't seen or noticed.
DonWigs @ Dec 15th 2006 8:29PM
You can't begin to gauge something like this. For one, the list doesn't include all of the Wii's internal parts, what's included in the box, or the cost of the development cycle (both of the system, and the money paid to Nintendo's employees). Plus--where is shipping, distribution, retailer profit, packaging, or the many other things that are factored in by Nintendo's accountants.
There is no credibility to this claim meaning NWF needs to stop posting this kind of crap.
epobirs @ Dec 16th 2006 3:16PM
#11
That is industrial manufacturing costs for the finished item ready to go in the box. The process is largely automated and a human might perform final assembly on a couple dozen units per hour. This human is likely paid quite low by US standards for factory labor, so the labor cost per unit is measured in pennies.
Nintendo would be cutting their own throat by trying to have a substantial profit margin on the base hardware. You can only sell that hardware once but after it has be set up in a consumer's home the sky the only limit on how much revenue that machine can generate is the number of games made available for purchase. (Working on the assumption that very people are going to buy multiple copies of the same game for a single machine, as opposed to gifts in which case the final result still links those games to single systems for their primary use.)
#12
What a retailers makes on a console sale has absolutely nothing to do with what it cost to manufacture. The retailer would only care if he were expected to take a loss on selling the machine, which has happened in the past. Certain console makers treated it as a cost for the privilege of getting in on the lucrative game sales.
#13
But isn't a major manufacturing cost and that is what is at issue here. Manufacturing cost is at most $3 for a bundled game unless there is some elaborate manual, packaging, or additioal hardware pumping up the cost. For instance, it would cost Sony far more to bundle an EyeToy with the PS2 as a promotion than it would to bundle a game that is little more than a DVD.
#14
It isn't free. In the accounting everything reasonably measurable is tracked down to the fraction of a cent. (Especially when working in Yen.) Shipping costs matter even if they're but a Yen per unit. But at this juncture it's considerably higher since Nintendo is willing to shoulder the cost to meet the combined launch and seasonal demand. Get that installed base built up is worth dropping a large sum on airlifting the product.
#20
That is a valid point but without access to Nintendo's accountants it's very hard to say how they've chosen to break down those costs. They can just as easily set a goal of a million units or 20 millions units as the point at which those costs are recouped. They may also choose to bill against game and accessory revenues.
It depends on what Japanese business law requires and what will look best on the reports sent to stockholders.
#22
I don't think any reasonable people are accusing Sony of ripping them off. The more frequent objection is that a more affordable and less ambitious machine that focused more on games and less on Sony other markets would have served us better.
Regardless of what certain bloggers who've had their reason stolen by Econ. professors may think, it doesn't matter how much a company loses on a product if it is simply out of my price range. Especially when it has that problem due to pursuing an overly elaborate feature set that goes beyond my immediate desires for that product category.
#23
There is thus not a shred of evidence in a relaible source that the Wii contains so much as a single new instruction at the chipset level, and if any, more than minor refinement on what was in the Cube. All information suggests that these can only be considered new cores in that they're produce at a smaller process node. (The additional RAM isn't necessarily part of the core itself although it is part of the chip package.)
The age of an instruction set is not the determinant of a chip's age. Yes, the x86 ISA originated in the late 70s but the currently produce high end x86 products are extremely far removed from what was int he original 8088. So far that in some ways the x86 ISA as used in the first 5150 IBM PC is barely used in binary form today for newly produced code.
Likewise, the PowerPC architecture has been through a great deal of evolution since the 601 first taped out. The ISA is supported but little else remains the same. In the Wii's case, the difference between it and the GameCube is less than that between the .25 micron Pentium III and its .18 micron successor Pentium III, which added a major colelction of new SIMD instructions in addition to the speed bump. The Wii chipset is merely what would have gone in the GameCube if it had been popular enough to merit a die shrink for continued cost reduction. Something similar to the PSone, very small and low priced, could easily have been produced if the market showed interest.
The fact is, Nintendo knew the slightly modified GameCube approach they took for the Wii would be poorly received by a market that had been trained by companies, including Nintendo, to expect all kinds of fabulous new and bigger numbers from a new console. So they played down the specs as much as possible and foucused their PR on what the machine was intended to bring to consumers that they hadn't seen before. Evidence suggests this was entirely the right policy choice for Nintendo.
Matt Rix @ Dec 16th 2006 3:42PM
Let's not forget the biggest fact: Nintendo itself. It's not like anyone(or even any company) can just go out, buy these parts, and make a Wii. Nintendo has devoted years to researching and developing this console... That can cost TONS of money... And then there are the costs of creating the OS, the channels, and all the WiiConnect24 stuff.
With electronics you're never paying just for parts... And besides, every single product you buy has markup... I don't know why people are so surprised that they're not buying the Wii at cost.