In an ever competitive market Microsoft has developed a smaller chipset for the Xbox 360 which will mean lower production costs.

The new chipset utilises an IBM microprocessor and an AMD/ATI graphics chip, both produced in a 65-nanometer production process, down from a 90-nanometer process of the original chipset.

The new chipset, codenamed ‘Falcon’ apparently, will lower overheating risks and cut costs at production.

Following the announced PS3 price drop there have been rumours of one for the 360, and the new chipset certainly points towards the possibility considering it has been on sale for almost two years with no reduction.