Recent agreements signed by Microsoft with a variety of companies to supply technology for the successor to Xbox reveal that the company is switching to the manufacturing model preferred by its rivals.

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.

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.

Although this will probably deter the hackers to some degree, and the business and manufacturing model open to Microsoft will almost certainly save it significant amounts of money (with actual physical manufacture of the chips likely to be outsourced either to the Far East or back to IBM itself), it has its drawbacks. The company touted the Xbox as the easiest platform of its generation to develop on because it was so similar to the PC; this will not necessarily hold true for Xenon, which won't be based on an x86 architecture like the Xbox and the PC. Making life tougher for the hackers may also make it tougher for legitimate developers - and there are also major question marks over how this console will manage to maintain backwards compatibility and play Xbox games, with rumours abounding that Microsoft has approached emulation specialists Connectix with a view to solving this thorny issue.