Kinect production costs show price could be much lower

Microsoft's Xbox 360 Kinect
Microsoft’s Xbox 360 console peripheral Kinect, that gives you controller-free gaming, recently launched at a retail price of $150. But the production costs are actually only $56.

This according to the EETimes who’s done an analysis performed by technology consultants UBM TechInsights. They say $17 of the total goes to Kinect’s PrimeSense reference system, which incorporates the cameras, microphones and central processor. The rest of the $56 total is split between around 20 other parts.

To quote UBM TechInsights’ Allan Yogasingam: “Basically, the strength of the design is the huge design win for the Israeli fabless company PrimeSense. They’ve provided the most innovative portion of the Kinect with their image processor, audio and video interface.”

Granted this doesn’t account for research & development investments (not to mention packaging & shipping) that Microsoft will have to earn back. But it’s interesting to note that with Microsoft selling the Xbox 360 console close to its manufacturing price point the last few years, the same could become true for the Kinect. Since that, like the console it’s an add-on for, could be seen as a hardware investment to be earned back via software/game sales. That said, it’s smart of Microsoft to get this out now to a few million early adopters and make a profit instead of losing money on it like the $1.26 billions spent on the original Xbox 360 launch. Although even that may go up in smoke with rumors suggesting Kinect is getting Microsoft’s biggest advertising campaign budget yet for a new hardware release.

Can we expect the Kinect’s price to be cut in half in the future? Game bundles seem more likely to give you more bang for your buck. We’ll probably have to wait until the Christmas 2011 season to find out. Which is probably when I’ll pick one up, since that’s when the Kinect Star Wars game finally comes out! I mean, how super awesome does that look?