Capitalism.
You make a product that everybody is going to want to buy, so you can charge whatever the hell they want for it. You should be grateful that it will be that cheap.
- CPU will use three 3.0GHz PowerPC cores, each with 32KB L1 cache, 32KB instruction cache, and the three share 1MB of L2 cache. Later alpha decks only featured two cores
- The graphics will be handled by a “next-gen” 500MHz ATI post-X800 adapter
- There will be 256MB RAM—no word on what type; memory cards will range from 64MB to 1GB
- There will be a USB 2.0 camera for 1.2-megapixel shots and VGA-quality video
- 5.1-channel audio is handled in software—X3DAudio to be exact (no word on in/outs)
Keep in mind that Microsoft lost money on every Xbox that was sold, the money is made up for in games (and most likely accessories as well).