A source told IGN that Flextronics has completed the testing phase of new hardware and has begun the manufacture stage. Flextronics manufactures the original Xbox and Xbox 360 hardware.

"Xbox 360 has found new ways to extend its lifecycle like introducing the world to controller-free experiences with Kinect and re-inventing the console with a new dashboard and new entertainment content partnerships,” Microsoft told IGN. “We are always thinking about what is next for our platform and how to continue to defy the lifecycle convention. Beyond that we do not comment on rumours or speculation.”

Flextronics provided no comment.

Source: IGN