Price cut Might be  as soon E3!

Xenon is a CPU that is used in the Xbox 360 game console. The processor, internally codenamed "Waternoose" by IBM^[1] and "XCPU" by Microsoft, is based on IBM's PowerPC instruction set architecture, consisting of three independent processor cores on a single die. These cores are slightly modified versions of the PPE in the Cell processor which was designed specifically for the PlayStation 3.^[2][3] Each core has two symmetric hardware threads (SMT), for a total of six hardware threads available to games. Each individual core also includes 32 KiB of L1 instruction cache and 32 KiB of L1 data cache.

The processors are labelled "XCPU" on the packaging and are manufactured by Chartered. Chartered reduced the fabrication process in 2007 to 65 nm, thus reducing manufacturing costs for Microsoft.

The name "Xenon" was repurposed from the code name for the Xbox 360 in early development.

IP ownership strategy with the chips could dramatically cut Microsoft's costs on the original Xbox. Microsoft had lost an estimated $3.7 billion over four years, or roughly a whopping $168 per box. 

I doubt it, but you can see that a price cut might be in the works for next year...or maybe a 2-stage price cut.

Nah, they will cut prices before the holidays. Microsoft times their price cuts pretty well, and 4 years after launch looks like the perfect time to halve the launch price.

They will wait until September or October if they want to cut price.

A June price cut is useless. Not many people buy consoles from June - August.

Does this make a slim possible or needs a smaller GPU as well?

32nm? So Intel, renowned for quickly transitioning process nodes may be beat by Microsoft to the punch? Now seriously, its not going to happen and really the costs of trying to transition to 32nm this year outweigh the costs. What happened to the idea of going to the 40/45nm node? Its still a good node! Don't hate on it.

If they could do this they probably will fuse the GPU onto the CPU as this is one of their goals if I'm not mistaken. I think they could probably do this with 45nm. I wonder if someone could get a estimate on how far they could shrink the internals of the machine... this not only leads to less power consumption (less fans smaller power supply), but also a smaller unit... less plastic and maybe a slot loaded DVD instead of a tray.

^ Laptop drive, single GPU/CPU, 2/4 ram chips instead of 8, integrated southbridge/hana scaler chip... probably twice the size of the slim PS2 if they really got keen.

Yes... fusing their south bridge with their two scaller chips would work well.  I think RAM is cheap enough they could go with 2.  Also I'm sure it's already been done, but if it hasn't the daughter chip and GPU will probably be merged.  The lower powered GPU and CPU will reduce the heat considerably and a reduction of fans and a smaller power supply will greatly reduce both size and cost.  I think the Laptop drive is stupid... two flimsy for a console like the 360... either slot loaded or top loaded like the PS2slim