Did Microsoft's Penny-Pinching Cost It $1 Billion? (MSFT)

Last year Microsoft spent about $1 billion on a massive recall of its Xbox 360 machines. But the company has never been clear about what, exactly, went wrong with the game consoles.

Gartner analyst Bryan Lewis thinks he knows: he pins the blame on a Microsoft-designed chip — one the company made on its own because it wanted to save money. Tech news site EETimes:

The Xbox 360 recall a year ago happened because “Microsoft wanted to avoid an ASIC vendor,” said Lewis. Microsoft designed the graphic chip on its own, cut a traditional ASIC vendor out of the process and went straight to Taiwan Semiconductor Manufacturing Co. Ltd., he explained.

But in the end, by going cheap — hoping to save tens of millions of dollars in ASIC design costs, Microsoft ended up paying more than $1 billion for its Xbox 360 recall.

To fix the problem, Microsoft went back to an unnamed ASIC vendor based in the United States and redesigned the chip, Lewis added.

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