The video gaming industry's emerging price war intensified Wednesday as

Microsoft

(MSFT) - Get Report

matched

Sony's

(SNE) - Get Report

$100 price cut on its top-of-the-line video game console.

Rumors that Microsoft would slash Xbox prices have swept through the gaming industry over the past month. Most observers were betting the Redmond, Wash., company would make its move next week at the industry's annual trade show. But after Sony struck first Tuesday, slashing the price of its best-selling PlayStation 2 by $100, No. 3 Microsoft moved swiftly to even the score. The cuts mean that all three of the leading consoles -- PlayStation 2, Xbox and Nintendo's Game Cube -- sell for $199 apiece.

Shares of Microsoft rose 62 cents to $55.50 in early trading.

Separately, Microsoft and partner

Flextronics

(FLEX) - Get Report

set plans to move an Xbox plant to Doumen, China, from Hungary, in a move aimed at cutting costs and overhead. In addition the company said it plans to open another facility in China in the near future.

Reuters

reported Wednesday that the company may also be looking for another partner to ramp up production.

Microsoft has said it expects to ship between 3.5 million and 4 million Xbox units by this June. The company has been losing money on console sales but hopes to more than make up for that with game sales.

The gaming industry is on target for what already seems like all-out war this holiday shopping season. The fourth quarter bears particularly significance this year, as it will be the first time the big three videogame console companies will be competing on level ground: All three have launched new products and will be fully stocked come fall.