Taiwanese tech paper DigiTimes reported that the external USB drive will be available to buy before Christmas this year.
According to the paper, Taiwanese games developers and gaming service providers consider an external drive a better approach than Sony's plans to integrate a Blu-ray drive into the forthcoming PlayStation 3.
An external model offers greater flexibility, and the inclusion of an internal drive in the PlayStation 3 could reduce its competitiveness in the market despite Blu-ray's greater disc capacity.
Confirming the Xbox 360 HD-DVD USB drive at the E3 gaming conference in May, Albert Penello, director of global marketing for the Xbox 360, said that the add-on "carries with it an extension of the HD era that Xbox 360 offers, and provides the most visually stunning movie watching experience available".
"This new accessory will connect to the Xbox 360 console with a USB cable, enabling it to harness the power of the Xbox 360 for the HD video outputs and digital surround sound," he said.
"As an accessory, it becomes another shining example of the flexibility designed into the Xbox 360 console in order to grow and add new features."
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