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The Nintendo 3DS portable game device costs about $101 to make and will start selling on March 27 in North America for $249.
According to a product “teardown” by UBM TechInsights, the 3DS costs about $15 more to make than the Nintendo DSi cost. Does that mean Nintendo is gouging consumers with the hefty price?
Not necessarily, since the cost estimate is simply an estimate of the raw materials for the 3DS. It doesn’t include the very real costs of marketing, advertising, research and development, retailer margin and other costs that go along with a worldwide product launch.
Still, Nintendo is making a tidy profit and certainly isn’t losing money, like some hardware manufacturers do when they first launch a product. Modern game consoles in particular are priced on a “razor and razor blades model,” where manufacturers lose money on the console and make money on the games at the outset. Then they cut costs and over time start making money on the hardware.
Nintendo has never really believed in that approach and has typically charged whatever consumers will pay, as it did with the Wii. The Wii started out at $250 in the U.S. and has only come down in the past five years to $199, even though the costs of making the Wii are considerably lower than they used to be.
There are some interesting tidbits in the teardown. The 3DS uses a graphics processor designed by Digital Media Professionals, an unknown company, and it has a Nintendo proprietary ARM processor. Atheros makes the gadget’s 802.11n/Bluetooth chip, which provides wireless connectivity. The gyroscope is made by InvenSense, with the model number ITG-3200.
Nintendo declined to comment on the teardown report.
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