Speaking with sources closely involved with manufacturing and distributing Nintendo products, the total cost of materials to manufacture the Wii U console (includes cost of controller) is estimated to be around $180. On top of this, our source tells us the controller’s total bill of materials and components cost no more than $50.
The source goes on to say that Nintendo is assessing the overall market and finalizing costs to determine the price for the Wii U, but it will be no less than $300 retail price when it launches.
According to our sources:
“Cutting production costs to maximize profits is Nintendo’s main concern with the Wii U. They are cutting costs in the Wii U’s hardware to build back confidence in investors. Nintendo wants investors to view Wii U as a less risky proposition. ”
The new NFC capabilities for each new Wii U controller costs no more than $5 to implement, and the prices of NFC implementation in mobile devices is expected to fall below $1 in the near future. Our source explained: “NFC capabilities are a drop in the bucket for Nintendo. As NFC becomes more mainstream in mobile devices, the price for NFC implementation will rapidly decline. Nintendo is jumping on NFC because of a projected cost decline in the technology.”
When we asked about the controller’s other manufacturing costs:
“The cameras in the Wii U controller are an estimated manufacturing cost of $6. They are slightly better quality than the 3DS and DSi cameras. The touch screen has a manufacturing cost estimated at $14.”
According to a report in 2010 by UBM Tech Insights, Microsoft’s Kinect cost$56 after tearing it apart and pricing each of its components. Microsoft charged $150 for the Kinect in November 2010. In comparison, the Wii U controller’s cost of materials would be slightly less than what Kinect cost when it was first released for the Xbox 360.
This wouldn’t be the first time that Nintendo has been under a pricing controversy. In 2011, the 3DS launched at $250 which seemed like a steep price for most gamers. The IHS iSuppli Teardown Analysis Service did a physical breakdown on the bill of materials and found that the cost of materials was no more than $100.71.
To be fair to Nintendo, there are many costs that can accumulate such as including software with hardware, R&D, shipping costs, marketing/promotion, transportation, packaging costs, and carrying/holding costs. When you add up all of these, you can see why game consoles can be priced so high. None of these costs were considered in the estimated $180 figure that our manufacturing source gave us for the Wii U’s bill of materials.
“Nintendo chose an economical GPU and CPU that could keep up with the performance of today’s current consoles, but keep hardware costs down to maximize profits. Nintendo got a bargain price on the custom GPU and CPU that the Wii U uses. There is a bigger focus on downloadable content, applications, video content, digital distribution, and services to create a stream of revenue. Investors will be ecstatic with the news.”
Rumors have suggested that Microsoft and Sony might be dropping the prices of their respective consoles this holiday season to combat Nintendo’s Wii U. The 4GB Xbox 360 (without Kinect) currently retails at around $200 in most stores, and gaming industry analysts are predicting a price drop to $150. This also falls in line with reports that the next Xbox might be revealed and launched in 2013. If Nintendo chooses to go with price tag of $300 or higher, it will be interesting to see how the Xbox 360’s holiday sales will compare to the Wii U. Especially with Microsoft planning a massive ad campaign for Halo 4 this holiday season.