Microsoft's red ring Xbox 360 problems have cost the company about a billion dollars in warranty repairs, but the research vice president and chief analyst at Gartner said that the hardware problems were caused because Microsoft wanted to be cheap. Instead of using an application-specific integrated circuit (ASIC) vender to make a graphics chip for the 360, Microsoft decided to design it themselves and have Taiwan Semiconductor Manufacturing create it. This saved "tens of millions of dollars" in design costs. Yes, only tens of millions.
The good news is that when Microsoft said that their red ring problems are fixed on newer units, they were probably right. They went to "an unnamed ASIC vendor based in the United States and redesigned the chip." Probably ATI, is what EETimes thinks. Moral of the story is to not skimp on chip design so you can save tens of millions, because that may come back and bite you in the arse down the road. [EETimes]