According to Dean Takahashi, Microsoft is working on project code-named Falcon: another hardware upgrade for the Xbox 360. It will have an IBM microprocessor and an AMD/ATI graphics chip that are manufactured in a 65-nanometer production process. Because of the smaller size, the chips will run cooler, meaning less repairs for Microsoft, and will cost less because they use less material and fewer manufacturing steps to produce.
Microsoft started making the Xbox 360s in August, 2005, with a 90-nanometer process – the time to use newer technology is here. Dean believes Microsoft is in the process of qualifying the new Falcon chips and motherboard this summer and expects the company to launch Xbox 360s with the new Falcon innards this fall. Microsoft has the option to take the power brick and put it inside the same chassis. It can also make a smaller version of the core, but this involves considerable redesign and retooling resources. And it could also beef up the console and make room for more costly things — as it did with the Elite.