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Unless M$ figures out how to make reliable hardware they will follow the path of SEGA. People simply won't buy unreliable stuff over and over again. 2 gens of crap consoles and it didn't matter how good the Dreamcast was. The same will be true with M$.
That being said, I don't think M$ will make the same errors next gen. Just like sony won't make the same errors.
Final answer is NO. The Japanese companies will always dominate the game industry.