Could this be the last "outsourced" Xbox?
The next Xbox could have a lot more of Microsoft inside

Microsoft is no stranger to hardware. Its computer mice and keyboards have been among the best for over a decade, and now the company is trying to take the lead in communication devices such as headsets and Web cams.

While it would be ridiculous to compare Microsoft's hardware know-how with that of Dell, who manufactures or brands nearly anything PC-related, it would also be wrong to say that the software giant has no experience in producing and selling a PC. In fact, Microsoft made one of the most successful 'PCs' in recent memory with 30 million sold worldwide.

That's right, we're talking about the Xbox. Although the original Xbox was composed of mainly off-the-shelf parts, it demonstrated that Microsoft knew what it was doing. The Xbox 360 took it a step further with more custom components designed to Microsoft's specifications.

So then, what's the next step for Microsoft? Believe it or not, it could be in-house chip design.

The New York Times interviews industry veteran and Microsoft engineer Charles P. Thacker, who tells about joint-labs in Redmond and Silicon Valley tentatively named the Computer Architecture Group.

Thacker points to the Xbox as one of the main reasons for Microsoft's interest in bringing chip design in-house. The first Xbox sourced a Mobile Celeron 733 from Intel, which was adequate; and for the Xbox 360, Microsoft tapped IBM to produce a custom triple-core PowerPC CPU. Legend has it that AMD was the original choice for the original Xbox, but was outbid by Intel at the 11th hour. On the graphics side the equation, NVIDIA supplied a GeForce 3.5 of sorts for the first Xbox, and ATI put its Xenos "R500" into the Xbox 360. NVIDIA also supplied audio and networking technologies for Xbox.

Clearly, Microsoft relies heavily on outside help to produce its console product. While the specialized hardware makers have helped to create powerful machines, outsourcing exposes Microsoft to certain levels of instability and risk. A prime example would be NVIDIA's dispute, which eventually lead to arbitration, with Microsoft over a supply agreement for its Xbox chips. Microsoft's Computer Architecture Group may be an effort to reduce its reliance on other companies.

Thacker, who stepped into the Xbox 360 design team after a key engineer on the project became ill, says that Microsoft is looking at other technologies besides strictly gaming, such as voice recognition.

“Voice is big,” Mr. Thacker said to the New York Times. “You can throw as much technology at it as you want to.”

Another aim benefit of Microsoft designing its own chips is that it will have greater control over how its software and operating systems interact with the hardware. By overseeing both, Microsoft may be able to accomplish feats that a company like Intel, who now has to produce chips for Apple computers and software, cannot.

“We are at an inflection point in the industry,” he continued. “Our friends say computers are not going to get faster, we’re just going to get more of them.”

Instead of taking a traditional approach, Microsoft likely will look towards parallel processing, which is where most of the industry is currently pointed.

“This is a historic time in the computer industry,” the story quotes David A. Patterson, a computer scientist at the University of California, Berkeley. “We’re in the middle of a revolutionary change toward parallel computing that will absolutely involve both hardware and software.”

By utilizing a system designed by UC Berkeley, Computer Architecture Group can design and reconfigure chips without actually producing them, thus reducing a potential barrier to entry into chip design.

A possible starting point could be in-house design for chips in laser mice, Web cams, fingerprint readers, and other Microsoft-branded hardware.

But fear not, hardware loyalists! Even with this its new endeavor at Computer Architecture Group, Microsoft is far away from producing chips at the caliber of specialists Intel, IBM, NVIDIA and ATI. Then again, the next-generation of consoles isn't due for another four years. With the seemingly limitless resources available to Microsoft, it's entirely conceivable that the next Xbox, which is already in the planning stage, will have a whole more in-house inside.

“So far we have not seen a single Android device that does not infringe on our patents." -- Microsoft General Counsel Brad Smith
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