You might not know this, but 120GB hard drives don't actually cost $180. Unless they're for the Xbox 360. The teardown fanatics at iSuppli attempted to find some method to this madness. As you can guess, the numbers don't quite add up to $180, but it actually gets a lot closer than you'd think.
Their supply chain break down goes along three steps. After a hard drive rolls out of the oven at either Seagate or Toshiba, it's preloaded with software and OS stuff (like Xbox Live). Next, it goes out to a Value Added Reseller, who buys the drives for about $75 a pop, and then slaps them inside the Xbox 360 compatible casing and pretties 'em up. They also do the retail packaging. This costs them about $5. They turn around and hit Microsoft up for $100 each. So Microsoft probably pulls about $80 of profit out of each one (though Amazon's got them on sale for $150 right now).
While that's a hell of a margin, it's actually less than I figured, because I didn't expect Microsoft to eat $100 on a drive a consumer would pay
$70 for, even with the little bits of plastic and software tacked on. Granted, these are all just estimates by iSuppli, so it's possible they're paying less and are reaping in totally obscene profits on each drive sold, but I actually don't relish assuming the worst all the time. [Multiplayer via Kotaku]