Back when Wii was released, we saw a number of teardowns followed up by estimations of how much the console cost to manufacture. There was a perception that with Wii’s apparently “outdated” hardware that Nintendo must have been price-gouging consumers – I guess those people hadn’t studied value-based pricing before.
Now we’re seeing the same thing with Wii U. There’s a wide perception that because it’s able to produce similar results to Xbox 360 and PS3 that it must be using outdated and therefore cheap hardware. A lot of people are curious to know how Nintendo can possibly be pulling a loss. To shed light on the mystery, CNN partnered with UMB TechInsights to estimate the cost of manufacturing Wii U.
You can check out the results by clicking below.
Wii U GamePad
- Touch screen: $24.75
- Main electronic components: $30
- Battery, wifi chip, plastic casing: $24.50
- TOTAL: $79.25
Wii U Console
- Processor: $40.00
- Optical drive: $17.00
- Flash storage: $6.00
- RAM: $6.00
- Wifi chip, Bluetooth, plastic casing, other components: $79.38
- TOTAL: $148.38
GRAND TOTAL: $227.63
That’s about a $70 difference between manufacturing costs and the cost of the Basic Set, at $299.99 retail.
How is Nintendo losing money, then? CNN suggests that it’s because parts costs don’t represent the total cost of Wii U development, which includes years of R&D. They forget to include other factors such as the cost of manufacturing and distribution (which admittedly is probably negligible per unit), packaging and manuals, software installation, and wholesale and retail markup. I’ve heard word that the Wii U Basic Set has about a 25% retail markup, which would put the price retailers pay for the system at about $240, which doesn’t leave wholesalers much room to make money unless Nintendo takes a loss on the system.