Microsoft’s Online Community Manager Cesar Menendez said two months ago that, despite reports to the contrary, Microsoft had no plans to release an Xbox 360 console with a built-in HD DVD drive. However, DigiTimes has now heard from sources in Taiwan’s optical drive manufacturing industry that Microsoft has in fact started work on a new Xbox 360 with an internal HD DVD drive. The company is reportedly in the process of picking a manufacturer to build the drive in question. If selection and certification go as intended, the revamped Xbox 360 console could launch as early as the first half of next year. GamesIndustry also reported on Monday that Microsoft was planning to offer its “premium” Xbox 360 and upcoming external HD DVD player as a bundle later this year, but DigiTimes makes no mention of this rumor.