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Xbox 720 already in production?

Microsoft's next console is already in production, according to a report.

The next generation Xbox has entered the manufacturing stages, according to a report by IGN. A source told the gaming site the hardware has recently started being manufactured at the Austin, Texas branch of Flextronics -- the company currently putting together the Xbox 360 and the original Xbox.

We've heard from Microsoft a couple of times that we won't see the console for some time yet, and that still looks to be the case. A new testing group was set up to handle marketing, software and hardware tests for the console. Now that's done and dusted, the actual manufacturing has begun.

It's most likely to be development kits that the company is making, to send out to game designers so they know what'll be at their disposal. It doesn't mean the actual console will be on sale any time soon. Microsoft won't comment on rumour or speculation and Flextronics refused to comment.

Rumours pegged the Xbox 720 as launching in time for Christmas, and I'd say that's the earliest we'll see it. It could also have a Blu-ray drive, according to a recent rumour, bringing it in line with the PlayStation 3, and making it more of a multimedia powerhouse. Considering the availability of movies online, I wouldn't be surprised if Microsoft foregoes the format though, much as Apple has with its iMacs.

It's rumoured to require a constant Internet connection to help fight piracy. A recent job posting by Microsoft suggests it'll also have 3D skills.

At the beginning of the year Microsoft claimed the console wouldn't be out this year. Then a couple of months ago it repeated we won't see the 720 at games fest E3. So that sounds pretty definitive.

What would you want to see in a next Xbox? Is it worth it packing a Blu-ray drive? Let me know in the comments or on Facebook.