"Next" Xbox Hardware Takes FormMICROSOFTS XBOX 2 hardware is starting to come together, according to reports, as final graphics details are thrashed out. Sources have told us that ATI is now starting to roll out the R500 part which will be the basis of Xbox 2, ahead of the machines launch on January 5 at the Consumer Electronics Show. R500 is a Shader Model 3.0 part, and will be similar to the R520 part that will be its next generation PC graphics chip. The tape out will be a relief to developers, who have been working on the 9800 class hardware that shipped in the Xbox 2 development kits. A spokesman for Nvidia told the INQ that he had had numerous requests from Xbox developers for GeForce 6800 cards, since coders were eager to start work on SM3.0 routines, regardless of the final render target. The tape out of R500 - which has been delayed, we are told, fairly substantially - means that Microsofts coders now face a frantic 2 months of coding to create demo routines to make the most of the graphics hardware, so that they can wow the Las Vegas crowds. We are hearing conflicting reports about backwards compatibility of the Xbox 2 hardware with Xbox 1, which appears to be one of the reasons for the delay. One camp is telling us that ATI is having a hard time making Xbox software work because of all the Nvidia-specific routines that were programmed in games. Another source is telling us that Nvidia is being more than a little awkward about releasing details of how its chips work to its rivals, and that Microsoft is sitting awkwardly in the middle. The lacerations of pens on paper were rumoured to be coming from the offices of mlearned fiends. The Xbox 2 deal that Microsoft has with ATI is very different from the one it put in place with Nvidia for the original machine. Microsoft pays Nvidia a flat rate for each chip it supplies for the Xbox, a figure which has stayed unchanged since the machines launch. As chip manufacturing prices have come down, this has enabled Nvidia to rake the cash in as it makes a huge profit on each chip. Realising its mistake, Microsoft is fabricating its Xbox 2 graphics chips itself, and just paying a license fee to ATI for the chip design - a far less lucrative deal. A spokesman for ATI told us that we should talk to Microsoft about Xbox 2, and declined to comment on the status of the companys progress with the R500 design. A Microsoft spokeswoman told us that the company wouldnt comment on speculation about the hardware in Xbox 2. Nvidia told us that it was happy to be working exclusively on its next-generation PC hardware.