Xbox Manufacture

In November 1999, Flextronics recommended producing Xboxes in a plant in China in order to minimize costs. Microsoft, however, wanted plants close to customers due to shipping concern sо Microsoft wanted to be able to replenish supply quickly. Sony had experienced delays in replenishing U.S. supply, which had to be shipped from Asia. In January 2000, Microsoft reached an agreement with Flextronics to build the Xbox, using its industrial parks in Mexico and Hungary.14

When the decision was made, Flextronics was the fourth largest EMS company with $4.3 billion in revenue, behind Solectron, SCI Systems, and Celestica. One of Flextronics unique features was its industrial park concept, which improved supply chain efficiency.15 The company obtained land, built a production facility, and invited selected vendors to locate their facilities in the park. Co-locating greatly reduced shipping costs to Flextronics and improved information flow between Flextronics and its vendors.

When the Flextronics began work on the Xbox program, it had industrial parks in Hungary, China, and Mexico. The Guadalajara, Mexico industrial park was designed to supply the Xbox to North America, and the park in Hungary would supply the European market. In Guadalajara, Flextronics dedicated a section of its industrial park to the Xbox. The park operated around thе clock, seven days a week to meet the production volume requirements, with supplies continually arriving, and one tractor-trailer full of completed Xboxes leaving every two hours.16

Flextronics planned to begin production on June 15, 2001. However, the system design was not stable enough to begin production in June. The Nvidia graphics chip had to go though several revisions, with prototypes produced at a contract fabrication facility in Taiwan, tested and modified in California, then remade and retested. Eventually, the chip met all specifications by itself, but the overall system was still unstable, crashing frequently. An incorrect power supply specification was discovered, and was readily fixed.17

As a result of design delays, production didnt start until September 2001, with Flextronics Mexico plant coming on line first, and reaching capacity in just over one month. The Hungary plant, benefiting from the Mexico experience, was at capacity within 3 weeks. Both plants produced 175,000 units weekly, more than the original expected capacity, and sufficient for product launch in November.18