Over the past generation, when a new console hits the market, the console manufacturer goes on to shrink the die size of the CPU. The benefits are a cheaper chip -- the smaller the die, the more that fit into a manufacturing run -- and cooler temperatures. The Xbox 360 die shrink is going to have to wait a little bit longer.
Originally slated for Q1 2007, the 65nm processors for the Xbox 360 are being delayed until mid-2007. This means gamers are going to have to wait a little bit longer to get those Xbox 360 units that aren't quite so hot; it also means prospective buyers may be waiting a bit longer to see a price drop.
Reducing the die size on the Xbox 360 CPU is a major step to a price reduction, something Microsoft needs right now. Xbox 360 sales are less than smoking and the PS3 and Wii offering up some competition, Microsoft could have used a price drop as an excellent weapon against them. Maybe Microsoft can get the 65nm chips up and running before the PS3 has a chance to entrench itself in Europe.