Takahashi, who also wrote the book "The Xbox 360 Uncloaked" and currently writes for VentureBeat.com, said there were several precursors to unacceptable hardware failure rates prior to Xbox 360's November 2005 launch.
An anonymous Microsoft engineer reportedly insisted in August 2005 that Xbox 360 manufacturers shut down their lines in order to address yields that were an "abysmal" 68 percent (i.e., 68 out of 100 machines failed).
Takahashi admitted that very low yields are normal at first, but the reaction time to bring the yields up was slow. The company did not shut down the lines to address the engineer's quality concerns, Takahashi said.
About three months before the launch of Xbox 360, team members reported "overheating graphics chip, cracking heat sinks, cosmetic issues with the hard disk drive and the front of the box, under-performing graphics memory chips from Infineon (now Qimonda), a problem with the DVD drive, and other things," according to the report.
Lack of air flow into the Xbox 360 became a growing problem. The console reportedly suffered from feature creep, as a hard drive and wireless controller components blocked air in an already cramped case. (Hence the holes poked in the edges of console.)
“It turned out in the end that this was all going too far, too fast,” an anonymous source stated. “They were adding too many features after things were locked down. That incremental feature adding just made it fragile.”
As widely reported, Microsoft in July 2007 announced a $1.15 billion write-off that addressed Xbox 360 failures due to the "Red Ring of Death."
The company apparently isn't happy with Takahashi's new story. He asked the software giant to confirm several facts in the report, but Microsoft stated, "This topic has already been covered extensively in the media. This new story repeats old information, and contains rumors and innuendo from anonymous sources, attempting to create a new sensational angle, and is highly irresponsible.”
Make sure to read the rest of the lengthy report, which Takahashi considers the final chapter in his Xbox 360 book.