If you look at the Wii U's specs, the system shouldn't be too expensive to produce. But it's kind of difficult to nail down the Wii U's bill of materials because Nintendo tends to be less open about its internals. Microsoft showed off its Xbox One chip in some high-profile presentations and sent system architects to Eurogamer, for example. What we can figure out is that Nintendo needs to sell "more than one" game to break even on the $299 Wii U. Nintendo can make around $10 per game sale, so we can deduce that the Wii U could cost around $320. Breaking that down to just the bill of materials is more difficult. CNN Money put it at $228, though a Chipworks tear down of the Wii U suggests that the chip would be far more expensive to produce than the estimated $40, closer to $100. Similarly, the optical drive is custom tech co-developed with Panasonic, adding to the cost (though hopefully saving money over time). The true cost is probably closer to $290 which leaves the company with $30 for distribution, licensing, etc. It's possible. So that's the amount of money we're working with. Thankfully, we have a better picture of what the cost of an XB1 or PS4 is which will aid us in constructing a new machine. And based on the cost of those parts, this is what I think Nintendo could scrape by with. [quote][b]CPGPU (AMD Jaguar 8-core x86-64): $100.[/b] This is the same base spec that the XB1 and PS4 use, though both of their implementations are a little more expensive. Microsoft customized the chip so that both 4-core blocks could communicate, and it also tossed some eSRAM into the mix. The PS4 runs more powerful hardware. [b]RAM (4GB GDDR5 or 4GB DDR3): $47 or $35.[/b] Sony lucked out in a major way by betting on GDDR5 memory. Remember that, at the time that the created the PS4 spec, they weren't actually sure that they could get enough 4GB modules to put 8GB in each console; the plan was to have 4GB only until their fortunes changed (and caused Microsoft lots of chagrin). It would not be easy for Nintendo to get their hands on this supply chain, but it is possible. If not, DDR3 memory pretty much grows on trees. [b]STORAGE (16GB NAND): $10.[/b] Yikes. This is one of the main areas in which Nintendo is forced to cut costs. They simply can't afford the extra $25 that it would cost to get more capacity on an HDD, even though hard disks are cheaper per GB than flash memory. It is an area in which they can make back a lot of profit, though. [b]OPTICAL DRIVE (Custom ???): $25.[/b] Nintendo developed a format with Panasonic that has some enhanced security and read/write speeds, and they don't have to pay to use Blu-Ray. Woot. [b]ELECTRONICS/HOUSING: $75.[/b] A comfortable estimate based on the PS4. [b]CONTROLLER (Wii U Pro): $15.[/b] The other major area of cost reduction. The tablet controller, which costs around $80 to make, has to go. [b]PACKAGING (Box, Contents): $8.[/b] The XB1 box is $5 and the PS4 one is $10. So $8 it is. [b]OTHER (Production, Distribution, Licensing): $40.[/b] Overestimating the previously determined $30 by a little bit for funsies. [b]TOTAL: $320[/b] [/quote] So now they're losing the exact same amount of money per base console. There are some ways for them to make this back. [b]SKU'S[/b] [quote][b]Wii U 16GB:[/b] $299 - $320 = [b]-$20[/b] This is the base console I just outlined. [b]Wii U 32GB:[/b] $329 - $328 = [b]+$2[/b] Nintendo pretty much breaks even here. The goal is not to sell 10 32GB consoles for every 1 16GB console, it's to price the 32GB console close enough so that more people buy it instead. You see tablet manufacturers like Google/Asus and Amazon, who barely break even on their base models, doing this a lot. Flash storage is nearly $0.50/GB, meaning you can double storage without increasing costs that much. We'll use the same idea coming up. [b]Wii U Holiday/Special Bundle:[/b] $379 - ??? = [b]???[/b] The closer-to-$400 space is still open for controller/game bundles.[/quote] [b]STORAGE[/b] [quote][b]Official Wii U 250GB HDD:[/b] $99 - $32 = [b]+$58[/b] Dat profit margin. Hard drive storage is insanely cheap: MS and Sony get their 500GB drives for $35 each. I added some to the cost of this one because it's sold separately. People know about external drives, but there are plenty who will buy something that's "guaranteed to be Nintendo compatible". Nintendo can also go the MS route and simply use a proprietary port to eliminate all competition. People will need storage regardless. [b]Official Wii U 500GB HDD:[/b] $129 - $42 = [b]+$88[/b] Same idea here.[/quote] [b]PERIPHERALS:[/b] [quote][b]Pro Controller:[/b] $49 - $20 = [b]+$30[/b] Nothing new here. Everyone does it. [b]Charging Cradle:[/b] $29 - $10 = [b]+$20[/b][/quote] So there are ways for Nintendo to make back its money on hardware alone.