Sources: Xbox 360 Slim Coming

We have already reported on the rumors circulating that Sony is planning to release a "slim" version of their PS3 hardware relatively soon. Not ones to be left out of the race to create an even smaller console, Microsoft may also be planning a "slim" makeover for the Xbox 360. Sources in India are reporting that the company has a slim version of the console in the works, and that an official announcement will come before Christmas.
It is certainly technically possible to slim down the 360. The Redmond company has publicly stated that it plans to move towards 45nm Valhalla chips as soon as possible. The smaller chips consume less power, and consequently, produce les heat. A 45 nm combined CPU / GPU motherboard design would probably reduce head emissions considerably and allow for a slimmer case. Of course, given the widespread hardware failures that only recently seem to have been brought under control, the company has reason to be shy about any major hardware revision at this point. We expect that an announcement may indeed be made this holiday, but we wouldn't expect to see the new hardware until late in 2009, once rigorous testing has been carried out.
While a slim form-factor would be a nice addition to the brand, size is not the only advantage of moving to a 45nm architecture. Less heat means less need for fans, and that could have a noticeable impact on noise. Forget about form factor, what we really want for Christmas is a silent Xbox 360.

[Via: Various India gaming blogs]
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