The Mercury News’ Dean Takahashi reports that the first Xbox 360 CPUs manufactured on the 65nm process are now on ships in the Pacific bound for North America. Should the consoles, which are made in China, arrive soon, then they could be on retail shelves sometime this fall.

Last month, Takahashi reported that the 65nm Xbox 360 chips would come in a revised hardware version that Microsoft has coded “Falcon.” The new chips are not only smaller and roughly 50 percent cheaper to produce than their 90nm counterpart, but they are also cooler – and presumably less prone to the Red Ring of Death defect.

Those expecting the 65nm die shrink to affect the two main chips inside the Xbox 360 will be disappointed to learn that only the console’s main processor will be the manufactured on the new process.

“Falcon is the name for the board that houses the 65-nanometer microprocessor from IBM,” wrote Takahashi. “The board does not include a 65-nanometer version of the ATI graphics chip for the Xbox 360. That version of the graphics chip is coming later.”

The new 65nm chip from IBM will work with both the current 90nm and the future 65nm iteration of the 65nm ATI GPU, according to Takahashi.

Oddly enough, it appears as though the main culprit behind the Xbox 360 reliability woes may be linked to the ATI GPU rather than the IBM CPU. As part of a recent fix to all 90nm-based consoles, Microsoft has been adding additional cooling measures into the Xbox 360. Found first in a repaired European Xbox 360 was a new heatsink with a heatpipe that leads to a secondary “daughter” heatsink helps to further cool the GPU.

The latest Xbox 360 Premium consoles with the HDMI-enabled “Zephyr” motherboard also features the extra heatsinks, providing further evidence that an overheating GPU is the main cause behind the Red Ring of Death.