The Change Mariner

Microsoft to Change Xbox Business Model and Stop Hackers

Design Technica:

... Rather than buying devices which are effectively PC components from manufacturers, Microsoft's next generation plan revolves around licensing technology designs from key suppliers such as ATI, IBM and SIS Technologies, and then arranging for the manufacture of these chipsets itself - effectively becoming a full-scale chip maker, albeit one without a fabrication plant of its own.

This new approach means that rather than selling components to Microsoft, as NVIDIA and Intel do, ATI and IBM will be receiving royalties for the use of their technology - but Microsoft will have ultimate control over the manufacturing and final use of that technology, effectively giving the company far more control over its own platform, and the ability to make significant cost savings on manufacture.

This is the same system that Nintendo and Sony operate, and it's one ATI and IBM are familiar with - since they've worked with Nintendo and Sony respectively on console projects. ATI provides the graphics hardware for Nintendo's GameCube under broadly the same terms as its new deal with Microsoft for Xenon, while IBM is one of Sony's development partners on the Cell microprocessor for the PS3.

Another benefit for Microsoft is that this form of technology licensing will make the Xenon platform into a far more proprietary system than the Xbox, thus making it far less likely that people will be able to hack the system to run PC software. This has been a major problem for the Xbox to date - the inclusion of PC components in the box was a red flag to a bull as far as software hackers were concerned, and it's thought that many Xboxen are now used as home media centres and emulators rather than as games consoles as a result.