But the evidence for the quality debacle was there to see evenbefore Microsoft shipped any machines. In August, 2005, as Microsoftwas gearing up production, an engineer raised a hand and said, “Stop.You have to shut down the line.” This wasn’t just a brief moment. Theengineer spoke up repeatedly.
That engineer, who asked not to be identified, had deep experiencein manufacturing. When production results were really off kilter,stopping a line and tracing a problem back to its roots was the answer.But the higher-ranking engineers, managers and executives chose to riskgoing forward. There wasn’t a universal backlash from the engineeringranks, according to one engineering source.
Nobody listened to that engineer — who spoke on condition ofanonymity — apparently because console launches are always hurriedaffairs. Yields — the percentage of working products in a given batchof total products produced — generally start low. As the manufacturersconduct statistical analysis and tight controls on every step inassembly, they learn how to drive the yields up.
Still, the picture wasn’t pretty. The defect rate for the machineswas an abysmal 68 percent at that point, according to several sources.That meant for every 100 machines that Microsoft’s contractmanufacturers, Flextronics and Wistron,made at their factories in China, 68 didn’t work. At the recent dinner,Bach denied that there was a big concern about defects at that point intime.
At that point, it is likely true that the engineers weren’t raisingenough red flags for the executives to pay attention. Early yields onelectronic goods are almost always lousy. Those veteran engineersfigured that they would be able to debug the problems and bring theyields up quickly. But the expected rapid improvement in quality justdidn’t happen. The communication between upper management and theengineers wasn’t clear. Nor was the strategy aligned between marketingand customer support.
There were plenty of warning signs. Early reports on the problemswere myriad. In an Aug. 30, 2005 memo, the team reported overheatinggraphics chip, cracking heat sinks, cosmetic issues with the hard diskdrive and the front of the box, under-performing graphics memory chipsfrom Infineon (now Qimonda), aproblem with the DVD drive, and other things. At that point, thecontract manufacturers were behind schedule and had only built hundredsof units. They were supposed to have been in high gear, makingthousands every week.