Basically they create a large circular silicon waferand put the conducting pathways for the (processor or memory) chip on it. ( http://www.geek.com/chips/from-sand-to-hand-how-a-cpu-is-made-832492/ if you want to know how it works)On one of these wafers they can fit many chips which they then cut out (like baking a pizza and cutting it into identical slices)There will however be defects on the wafer, the chips that occupy the areas that have the defects on them are either useless or can be used as lower end parts by disabling part of the chip(like if a gpu has 18 compute units you could only use 16 if the defect is on one of the others, ps4 already does this by only using 18 out of 20 cus so they can have two for redundancy to improve yields)Not all of them come out as well as the others and some can handle more voltage than others, so they can be higher clocked.Now the problem is that when you have really large chips.The larger the chip the bigger the chance that each chip will have a defect. (exponentially much so)If you have 10 defects on your wafer but you fit 100 small dies on the wafer then only at most 10 , so ten percent, will be throwaway or salvaged as low end part, but if you only fit 10 on there then it's likely that many of them may have one of those defects.You could easily have to throw away 30-50 percent or even all of them.Xbox one uses APU which is a really big die that needs to house the cpu, gpu AND in xbox one's case also the ESRAM which takes up a huge amount of transistors and therefor physical space on the chip.They end up with little hardware power yet a huge (5 billion transistor) die, so they have low yields.Normally low end hardware only takes a tiny little die so yields are good, but for some reason that either MS engineers or suits/beancounters can only know they decided to go for this huge ass APU with esram.From my limited knowledge Sony ended up with a lot more bang for their buck... they put their die space into a bit more gpu power and didn't design their apu around needing esram (since they didn't cheap out on the vram, which is a collection of seperate chips that are embedded on a PCB and connected to the APU through a memory bus)Meanwhile MS seems to have thrown the baby out with the bathwater.