Microsoft went with a new kind of memory chip for its new generation Xbox, the San Jose Mercury News reported.
Only two companies make the chip and one of them, Germany's Infineon Technologies, ran into trouble producing the chips at the correct speed, sources told the newspaper.
Microsoft has not been able to the meet the demand for the Xbox 360 because of the ongoing chip shortage, the sources said.
A Microsoft spokesman refused to comment on the chip situation, only saying "component shortages" were behind the console shortage.
Infineon also declined to comment, the newspaper said.
Microsoft Game Division chief Peter Moore said the shortage should be resolved in four to six weeks now that another contract manufacturer has been added to the mix.
"We have more than 200 suppliers and I'm not going to point the finger at any one of them," he told the Mercury News.