Xbox 360 price drop rumoured

IF ANYTHING COULD ensure the launch of the PS3 became a nightmare for Sony, a significant Xbox 360 price drop would be it.

A small price drop in Europe has already occurred, but this tiny adjustment to the Core SKU is hardly worth mentioning, and certainly won't affect the launch of Sony's new console. A more significant drop of around $100 would certainly cause further worrying at Sony HQ, and it seems Microsoft are pushing ahead with cost reductions in an attempt to make the price drop financially plausible.

Rumours of contract renegoiations with Microsoft from suppliers in Taiwan, state that "the total production cost [of the Xbox 360] can be reduced by 15-20% due to diminishing costs for most components along with increasing production scales and decreasing defect rates" - and this fits perfectly with similar sources stating back in July that a price drop late in 2006 was a target for Microsoft.

Also, in September 2005 Microsoft said that the market should expect annual price drops for the 360, which would again fit nicely with the above rumours, considering its been exactly a year since the statement was made.

Furthermore, Microsoft has previously stated that the company has "a number of surprises up our sleeve" for the 360 in Q4 of 2006 - but these surprises are probably content and feature announcements as opposed to price-drop related, and news from the recent X06 conference of the addition of 1080p support, HD-DVD availability, and an extra Halo game from Peter Jackson, suggest this year's surprises are over.

Due to these rumours and statements, a number of industry pundits are suggesting the drop will come in to effect at a similar time as the launch of the Playstation 3, to inflict maximum damage on Sony's launch. But despite all of this, it still seems a price cut in 2006 is highly unlikely for two reasons.

Firstly, it would seem odd to drop the price just before the holiday season, considering demand for the console will be at its highest and also that the PS3 will be in incredibly short numbers - further driving up demand for the 360, without the need for any lowering of price.

Secondly, the Xbox 360's CPU is expected to receive a die-shrink from 90nm to 65nm in the first quarter of 2007, and possibly the ATI supplied graphics chipset too. Although this news is doing the rounds at the moment, its of no surprise and was well known sometime ago by the Inq and others. It's unlikely that the re-costing of multiple components from Taiwanese companies has effected a plausible $100 drop in price for the 360, however, these die shrinks coupled with the cost refactorings, could present MS with the significant drop in price they need.

By the time the die-shrink and cost-savings are incorporated into the console in Q1/Q2 2007, Sony will be ramping up production of the PS3 to allow for the shipment of much higher numbers of the product than the meagre offering expected at launch, and will also be belatedly releasing the console in Europe. This is the perfect time for the 360 to receive a price cut. µ

See Also
Microsoft announces HD-DVD pricing
Playstation shenanigans outed, dissected
Wii pre-orders are go
Shortages of PS3s hit US/Japan