Manufacturing Focus: Our Weekly Feature Article on Topics Related to Manufacturing Management  
 
 
  - December 5, 2007 -  

Manufacturing News: So Just What was the Problem with Microsoft’s Xbox 360?

 
 

As Its Reserves for Warranty Claims Rise, the Root Cause is a Guess Outside Microsoft; the “Red Rings of Doom”

 
 

 

SCDigest Editorial Staff

SCDigest Says:
Not only has Microsoft been quiet about the number of Xbox’s facing the problem, it has also refused to provide specifics about the design or production defect causing the failures – though it must be known internally, as most recent units are said to have finally cured the problem.

What do you say? Send us your comments here

Amid the apparent strong retail market success of Microsoft’s Xbox 360 gaming system, the financial bonanza is much less than stellar for the tech titan. Early on, Microsoft lost money on every unit sold, as production costs per unit exceeded sell prices to retailers, and it is not believed to be too much above break even currently.

More problematic: the persistent quality problems that have plagued the units since they were released. While the very latest shipments are said to have finally solved the problems, huge numbers of units have experienced issues that required replacement.

In July, Microsoft said it would take a $1.05 billion to $1.15 billion pre-tax charge to earnings for the quarter ended June 30 for anticipated costs under its current and enhanced Xbox 360 warranty policies. Some have recently suggested that huge number may be inadequate.

The company won’t say how many units have been affected, but do the math. With a retail selling price of around $350, divided into $1 billion or so is a lot of claims. Use the cost to produce (about the discounted price at which the unit is sold to retailers) and you get an even larger number.

The issue: after long periods of play, the older 360 consoles lock up. Upon reboot, the front of the console can then display what are referred to as “the Red Rings of Doom” by avid gamers – the console may be shot, though some on the internet have offered exotic techniques to try to revive a dead Xbox.

For example, though the high level problem appears to be the inability of the Xbox to handle the heat generated by prolonged play, some have claimed revival success from actually overheating the Xbox by wrapping it in towels.

 
 
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What’s the Root Cause of the Quality Issue?

Not only has Microsoft been quiet about the number of Xbox’s facing the problem, it has also refused to provide specifics about the design or production defect causing the failures – though it must be known internally, as most recent units are said to have finally cured the problem.

The company does note on its web site that it has had "an unacceptable number of repairs to Xbox 360 consoles." In July, it also announced a special three-year warranty extended warranty program that is long enough to cover any system purchased since the system's launch. Free shipping is also available to return the product to Microsoft.

Ouch!

In general, there is a belief that either the power cord or a specific component inside the console is overheating and damaging the entire system. There is a growing body of evidence that keeping the unit very cool can avoid the problem from occurring.

In 2005, Microsoft recalled the original Xbox's power cords due to an announced risk that they could lead to fires. Whether this issue was related to the overall overheating and failures is unclear.

Until Microsoft is more open about what happened, the bloggers will keep the debate alive.

Do you have any theory as to what is causing the Xbox failures? Has Microsoft handled this well? What should they have done differently? Let us know your thoughts at the Feedback button below.

 
     
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