VNU reports that Microsoft has solidified a deal with Chartered Semiconductor to change the process size of the XBOX 360 CPU from 90nm to 65nm. As foundries begin to pick up 65nm production, it will be cheaper for Chartered Semiconductor to produce the CPUs on a 65nm process since the company can dedicate resources to new production lines rather than stick to legacy production.
As an added bonus, the thermal envelope associated with the CPU is expected to decrease as the process size decreases. The clock speed and design will remain the same for this new iteration. There is no word yet on whether or not the XBOX 360 graphics core designed by ATI will also undergo a die shrink.
With the switch to 65nm, Chartered will also save on wafer costs, as more dice may be cut from a single wafer. Hopefully, that additional savings will also translate to cheaper XBOXs for the rest of us. The new processors will not enter into production until Q1'07.