A teardown by IHS Markit offers some potential insights into the Xbox One S's manufacturing costs.

Microsoft released the Xbox One S this week. Although the console doesn't contain wildly different hardware from its predecessor, it does sport some interesting new features. It packs overclocked memory and processing to support HDR visuals in games. It also features an IR blaster built directly into the front of the box and sports a fresh and compact design.

IHS Markit has torn down the Xbox One S' components and offered some estimates as to how much it costs Microsoft to build.

Xbox One S

The Xbox One S costs around $324 to source and manufacture. This cost refers specifically to the 2TB model, which Microsoft sells for $399.99. While there are other expenses involved when selling consoles, it provides a margin of $75 for Microsoft to play with. While IHS Markit doesn't specify which Xbox One model they are referring to, a similar teardown they conducted back in March suggested that Microsoft was paying $300 per unit for the previous box, presumably for the 1TB model. It seems entirely likely that with matching HDDs, the Xbox One S is probably cheaper to produce over all.

The most expensive component in the Xbox One S is the CPU/GPU, costing around $99. IHS Markit notes that the price of the custom 16nm AMD chip should come down as the manufacturing process improves. The incremental cost reductions should eventually provide better margins or give Microsoft some additional leeway for Xbox One S sales and price cuts as we head towards Project Scorpio.

The new processor also requires less power than the previous console, which in turn generates less heat. The new processor meant Microsoft were able to not only shrink the console, but also pack the power supply unit directly into the box, eliminating the previous console's unwieldy power brick. Reduced cooling requirements meant Microsoft were able to shave $7 off the cost of the Xbox One S when compared to the Xbox One.

For more detail, be sure to check out IHS Markit's press release over here.

Every component in the Xbox One S seems like a design win. Getting favorable margins on a console isn't typically an easy feat, but the Xbox One S manages to achieve it while also becoming the most fully-featured and affordable UHD Blu-ray player on the market.

While Sony's PlayStation 4 'Neo' could steal the Xbox One S's thunder in the coming months, those who are invested in the Microsoft ecosystem will likely find the Xbox One S more than satisfactory for now. The 6 teraflop Xbox Project Scorpio is still on the horizon.