Microsoft hires Wistron to make Xbox game console

Microsoft Corp, the world's third-largest maker of video-game consoles, said it hired a unit of Acer Inc (宏電) to make the Xbox, seeking to cut costs and close the gap with market leaders Sony Corp and Nintendo Co.

Wistron Corp (緯創資通), the manufacturing arm of computer-maker Acer, will start making the Xbox console in its plant in Zhongshan, China, by the end of this year, Microsoft said in a statement.

Lower-than-expected demand for the Xbox, which debuted in November, prompted the world's biggest software maker to drop prices in Europe for the second time last week. To keep costs low, Microsoft is outsourcing the console, signing up Wistron as the second supplier after Singapore's Flextronics International Ltd.

Wistron will "enhance the competitive position of the Xbox in the market," Microsoft said. "The two manufacturing partners are focused on improving cost and operational efficiencies."

The Xbox will trail Sony's PlayStation 2 in a record year for video-game consoles worldwide, when sales are forecast to reach US$12 billion, market researcher Informa Media Group said in June.

Sony will account for more than half of the 44 million units expected to be sold this year, a third more than Nintendo Co's GameCube and more than four times those of Xbox, Informa said.

Sony, which produced its PlayStation 2 in Japan until recently, is negotiating with Taiwanese companies that may make the game console in China, The Wall Street Journal reported earlier.

"Rivalry in the game console business is escalating," Wistron said in a statement.