You mention a cheaper cooling system. Surely a smaller fan wouldn't make for such a significant price reduction?

Doesn't the denser fabrication process produce chips that are cheaper? Once the yields are up, you get more chips per wafer, at about the same price per wafer as at the old process, and thus cost-per-chip goes down significantly.

I'm glad to see Microsoft hot off the heals of a "Dear Customers, here's a billion dollars because our console reliability is crap" is now deciding to move it's chip fabrication from a 90nm process which is now mature and has had the kinks worked out to a 65nm process that doesn't.

Good old Microsoft...

Now wait, I can see the point of the price cuts and the price points sound reasonable, though I think killing the core unit right now would be a good idea, going forwards with the old premium and new elite at $299/$399 prices seems a better strategy to me personally.

That said, I am worried by the reasoning about reducing cost.

Moving to 65nm means less heat which means you need a smaller/cheaper cooler, and the mention of other reductions to the cost of manufacture.

First off, since the reliability issues are almost certainly heat related why would MS do anything to reduce the effectiveness of cooling in the system? With the newer 65nm chips, I'd have thought that the same or similar cooling system would provide a cooler system by more efficiently removing heat from the now cooler CPU/GPU combination. Moving to a smaller cooler seems like a very bad idea.

Since Microsoft got into the current mess with it's reliability by cutting corners and squeezing suppliers and manufacturers hard, why would they compound the earlier error by doing the same again?

Personally the move to 65nm seems like an opportunity to evaluate the design of the unit and make bloody well sure that the reliability is where it should be, never mind the cost. If MS doesn't regain some credibility regarding the reliability of the RROD 360, then no amount of price cutting will help them.

... "The necessary reduction in price to bring the XBox360 in line with the market has been calculated to be around... oh B*GGER, my PC has crashed... hang on a second... no wait, it's re-booting... no don't go away, it's got Vista and everything... will you wait if I tell you it uses PowerBoost... don't think you can come back after I've gone home and hack my workstation, I've installed Bitlocker.... oh SH*T the Windows Genuine Advantage thinks it's an unlicensed copy and disabled everythig... please come back... I've got a calculator in my jacket that uses embedded Linux..."

Right now, the yields on 65 nm are both per centage wise less than 90 nm, but yield less die per wafer. So, short term, MS will either be paying more per die, or will be pounding on the vendor for bigger discounts.

Going from 90 nm to 65 nm doesn't really give you that much better of a price reduction. And the cooling issues are nice, but probably won't be much. I doubt they will be $80 worth. MS is just going to cut their profit by 3%.

Doubt Microsoft are reducing their profit by 3%, more likely they are increasing their hardware loss by 3%, so that more people buy the console. If more people buy the console, more people buy games, and that is where the money comes from on consoles. Making it to a 65nm process may instill more confidence in it's reliability, possibly increasing sales as well

Right now an X Box costs £279.99.

Will we see a cut in price in the UK, and will reghardware.co.uk tell us? Or will we just hear about events in foreign countries?

The bundle deals with the 360 have got more and more impressive. The last I looked, I could get pretty much the two hottest chart titles free at any time, the deal updating whenever something new and big came out. Which has got to be worth at least £50 or so off the console, should Microsoft decide that the US gets a price cut and we get one too.