As part of their ongoing battle to reduce the cost of the XBox, Microsoft have struck a deal with Focus enhancements, providing low-cost TV-Out technology for the video game console. This new partnership is part of a general hardware overhaul by Microsoft in an attempt to reduce the loss incurred by the sale of the console, estimated to be approximately USD150 per unit sold.
We have been very impressed with Focus' TV-Out technology, design methodology and responsiveness, said Todd Holmdahl, General Manager, Xbox Hardware. Throughout the development process, Focus' engineers exceeded our expectations in design implementation, delivery time and quality. As a result, we have a cost-effective TV-Out chip, which we anticipate will help us better compete in this hotly contested, price sensitive market.
In May 2001, Microsoft and Focus Enhancements began an OEM development program to produce a low-cost TV-Out chip with fine text capabilities that would fit into the existing Xbox configuration, as part of a cost reduction effort. During the past 12 months, Focus met all product specification milestones and has qualified the chip for inclusion into Xbox.
Michael D'Addio, president and CEO of Focus Enhancements, said, The fact that Microsoft has accepted Focus technology and is incorporating our FS454 chip into Xbox is a landmark accomplishment for the company. It was an incredible experience for us to have the opportunity to develop this chip for the console. I am extremely proud of the performance of our semiconductor team, which developed this very important product on schedule, while either meeting, and in some cases, exceeding the Microsoft design specifications. The completion of the FS454 validates Focus' position as the leading low-cost, TV-Out technology company. Being a part of Xbox represents the single most significant accomplishment in Focus' history and a major business opportunity for the company. We look forward to receiving initial production orders for the FS454 from Microsoft.
The new chip is designed to match the new design motherboard which will be used in future versions of the XBox and is another part of the cost reduction effort by Microsoft.
Microsoft is currently involved in love-hate negotiations with nVidia, producer of the Xbox graphics chip, in order to reduce the price it pays for the chips. nVidia claim that if Microsoft have their way, they may have to produce the chips at a loss.
Earlier this year, Flextronics International Ltd. , which manufactures the console for Microsoft, began the transfer of some Xbox production to China from the current plant in Hungary. Cost savings are considered to be the main reason for the transfer.
