The Shocking Inside Story of the Epic Defects That Killed Millions of Xbox 360s

Dean Takahashi, one of the most respected tech journos around, spent years putting together this mind-blowing expose that reveals the truly epic scale of the problems that lead to millions of dead Xbox 360s. It really is one of the most stunning flustercucks in gaming history. According to his account, Microsoft willfully ignored deep, systemic problems in the console's production that reached from chipmakers—initially, only 16 out of every 100 of its IBM-made processors worked—to production lines, where just before launch, an unbelievable 68 percent of consoles made were clunkers.

Here are a couple of the more jaw-dropping excerpts:

Most of the problems pointed to as the cause of the epidemic of Red Rings of Death showed up way before launch, naturally:

In an Aug. 30, 2005 memo, the team reported overheating graphics chip, cracking heat sinks, cosmetic issues with the hard disk drive and the front of the box, under-performing graphics memory chips from Infineon (now Qimonda), a problem with the DVD drive, and other things.

The test machines were not properly debugged, due to an ill-advised cost-cutting initiative that shaved $2 million from $25 million paid to Cimtek, a test machine maker in Canada. The Microsoft team decided not to pay the consulting fee to Cimtek to build, manage and debug the test machines. Sources familiar with the matter said there were only about 500 test machines at the time of launch, a third of the 1,500 needed.

“There were so many problems, you didn’t know what was wrong,” said one source of the machines. “The [test engineers] didn’t have enough time to get up and running.”

The shortages at launch were in fact largely a product of the Xbox 360's low yields—in Spring 2006, this was the situation:

Microsoft had more than 500,000 defective consoles that sat in warehouses. They were either duds coming out of the factory or they were returned boxes, according to inside sources. The yield was climbing, but far too slowly. The company stood by its statement that returns were within “normal rates for consumer electronics products.”

At that time, the yield rate was still only "an abysmal 50 percent on the first pass. When the bad machines were reworked within the factory, the yield went up to 75 percent –- hardly acceptable." It's gotten better now, but still not amazing. As of the beginning of 2008, it's still only 85 percent—meaning for every 100 Xbox 360s produced, 15 don't work.

The Falcon revision, which used smaller 65nm chips and had a bunch of other tweaks, like more expensive, better quality heatsinks, alleviated some of the problems, as well as made them cheaper to produce—as many had suspected with their introduction. The latest, the Jasper board, takes that a step further, which Takahashi reports is what allowed them to steeply cut console prices last week.

All of this is just a small cut of Takahashi's dense, extremely well-reported feature. If you own an Xbox 360, you owe it to yourself to read.