While promoting the US DVD release of Iron Man, director Jon Favreau revealed his wish list for the sequel. This includes shooting in IMAX, possibly using 3-D technology, introducing the Mandarin and turning Terrence Howard's character into War Machine.
"The writing is really coming along well," said Favreau. "We've got Justin Theroux [Tropic Thunder] working on it, who Robert Downey Jr knows. He brings a real sense of fun. He's never worked in this genre before, and so he has that great newcomer's enthusiasm that I think we still share."
Admitting that they’re looking to writer Matt Fraction’s recent stint on the Iron Man comic for inspiration, Favreau went on, “"I haven't talked to him yet, but we want to talk to him and get him out here. The Fraction series seems to be informed as much by our movie as by what had happened with Iron Man before."
he also said that he’s struggling with trying to work out how to make The Mandarin work as an on screen character, and that if he does appear in the movie, he will not be the central villain.