[citation][nom]immanuel_aj[/nom]Really now? If they were using high-end PC components they WOULDN'T be able to sell it at $350 - $400. What's wrong with analysts?![/citation]
Simple: mass production.
Whoever wins the GPU design gets guaranteed sales of several million units of a specific part model, which removes a lot of risk, related costs and the "early adopter" tax. Same goes for whoever wins the CPU design, the RAM contract(s), the motherboard contract, the chassis contract, etc.
There are also economies from forgoing the legacy power rails from the PSU and motherboard (it can be an all-12V distribution design except for 5VSB), economies from integrating the GPU onto the motherboard, skipping all the extra internal connectors and cables, sharing heatsinks/heatpipes/fans, not having to do any interoperability testing with any customer-swappable parts, etc.
I have no difficulty imagining how building millions of practically identical relatively high-end PC-consoles can be done around $400. Keep in mind that retail prices on high-end GPUs and CPUs have very little to do with actual production costs and more to do with making enthusiasts eat a larger chunk of the R&D costs. If you ordered 20 million i7-3770 or HD7970 specifically for integration in a proprietary gaming appliance instead of the usual 1k trays generic PC parts, you would likely get much better pricing than retail since your final product does not directly compete against your parts vendors' retail products.