Either we're looking at an inaccurate rumor here, or the next-generation Xbox won't be the graphics powerhouse some of us expected. The folks at IGN claim to have gotten details about the "Xbox 720," and they say the upcoming console will feature a GPU equivalent to today's Radeon HD 6670.
Just to put things in perspective, the 6670 costs $69.99 at Newegg. It has 480 shader ALUs, a 128-bit memory interface, and the ability to process 8 pixels and 24 texels per clock cycle. IGN claims this GPU will endow the Xbox 720 with six times more graphics horsepower than the Xbox 360, which might well be the case... but the Xbox 360's GPU is the equivalent of an archaeological relic these days.
A better comparison would be with AMD's new Radeon HD 7970, which has 2048 shader ALUs, a 384-bit memory interface, and the capacity to process 32 pixels and 128 texels per clock. To make matters worse, IGN says the Xbox 720's graphics chip will enter production "by the end of 2012," and that the console itself won't be out until the fall of 2013, almost two years from now. At that point, even the 7970 will be looking long in the tooth.
I suppose a 6670-class GPU might make sense if Microsoft intends the Xbox 720 to be an uber-cheap device meant to double as a Joe Everyman's media hub (and do a little gaming on the side). Still, if there's any truth to this rumor, games might not make a truly substantial leap in visual fidelity for a long, long while.