I wouldn't give that post that much credence, dude acts like he's read the contract.
It's GAF and the Internet so you're right to be skeptical. And no, I haven't read the Foxconn/MS contract. But what I'm describing is pretty standard for contract manufacturers. It's not really a secret how Foxconn and other contract manufacturers operate either. Sure, it's possible that MS is able to cut a deal that is totally different than what everyone else gets, but I find that unlikely.
3 months into productions, MS relative to Sony seems to have cut production by half, or Sony has somehow managed to double it's production relative to MS
Seems odd that even Foxconn could be that flexible that quickly
Still not sure where I fall on the XB1 production
Someone else already posted a link describing some of Foxconn's production lines, and it says they're simple and modular. What this means is that the manufacturing process is broken down into very simple actions. There will be a station where the person's job is a single task that is general very simple, like screwing in the BRD. It then goes to the next station where the person sticks in the BRD connectors. And so on. Each station is set up so that there can be multiple people standing there doing the task and there is very little training needed. Turning production volume up and down can be as easy as adding or removing people from the various stations, or even building new stations to staff more workers..
Each production line has a set time frame that a product is supposed to take to build. Let's say it's 4 weeks for the XB1 (just a random number, the real number is probably in 10+ week range). MS will plan out how much volume of XB1s they think they'll need for the future months. They need to factor in that 4 week build time, so if they need 200k units in May, they know they have to order at least 200k units by the end of April. It's unlikely they do one large order; most likely they do smaller weekly orders. So if by the end of April, they realize they just need 150k, they just don't place an order that last week. It gets harder as the production time increases, but the principles are the same.
So why doesn't Foxconn get pissed off by lower volumes? This is where the conjecture comes in because I have no idea. Foxconn might be getting paid per unit built. It could be that as the cumulative volume of units built increases, the amount they get paid goes down. So even with low volumes the overall payments they get should be stable. On the other hand, they might be getting paid larger fees for maintaining the production lines. If that's the case they may not care if the line is not building much, they're getting paid anyway. Or they may be doing something completely different, but Foxconn takes care of Foxconn; they are in enough demand that they can ensure they are being paid one way or another. Plus the tasks each worker does is so simple, they are easily transferred to a completely different production line, so the risk of having idle workers is lower even with production lines down. Parts can be stored, and while contract manufacturers don't like to hold on to that stuff, it is really only a problem if the part is only used for a single product (like the APU) AND the line completely shuts down, which is unlikely.
Again, this is all standard capacity management stuff, nothing secret or magical about it. It could be MS does something totally different... they are Microsoft after all, and have more clout and cash than a typical company.
