Microsoft has learnt a lot from its original XBOX console shipping now. The company has by now faced practically all challenges the console world has to offer, its new business does not seem to be really lucrative for the Redmond, Washington-based giant, but the company will take another massive attack on the console market with its new XBOX 2 console in 2-3 years time.

The new system will not only be more powerful compared to the original one, but in order to address its initial mistakes, Microsoft is deploying a fully new strategy for the next-generation console development and manufacturing. Instead of paying companies for chips’ development and then acquiring the actual processors from its partners, the largest software firm on the planet now forms technology agreements and will reportedly with chip manufacturing itself.

A report from News.com suggests Microsoft to participate in development process of chips intended for the company’s future console more actively. It is assumed that its technology partners, namely ATI Technologies, IBM and Silicon Integrated Systems, will develop specially customized processors for Microsoft’s XBOX 2 using Microsoft’s guidelines. In contrast, current partners of the software giant, such as Intel, NVIDIA or Focus, supply the firm with chips very identical with their offerings for conventional personal computers.

IBM and ATI Technologies already have quite a lot of experience in creating customized chips for companies like Nintendo. Currently both ATI and IBM supply technologies for the Japanese firm’s latest GAMECUBE console. Both Flipper graphics and multimedia processor as well as Gekko central processing unit are made by IBM. As a result, ATI Technologies receives only royalties from Nintendo and does not cope with chip manufacturing.

Specifically tailored processors provide more performance and cost-efficiency for console products. Currently Microsoft looses tens of US dollars on hardware for every console it sells, therefore, the company definitely needs to address the issue in its next project. Furthermore, customized chips typically make a bit harder to hack the consoles, what is a notable problem for console makers as well.

Microsoft Corporation is likely to adopt Nintendo’s approach to pay only royalties for technologies the company utilizes in its products, but not to acquire every single chip from every single developer. It is not known who will manufacture semiconductors for Microsoft, but there is likely to be a number of makers, as both IBM and SiS, CPU and multimedia logic partners of Microsoft, have their own manufacturing facilities. Surely, there will not be a lot of semiconductor partners, as Microsoft seriously aims to cut the cost of its XBOX 2 down.

The semiconductor manufacturing deals are likely to be inked at a later date, the source suggests.