The Inq heard from Japanese newspapers that Sony will shave costs on the European PS3 console by somehow separating out CPU and GPU functions. This change will limit backwards compatibility with old PS2 games:
To make up for compatibility shortfall, Sony will distribute software, the newspaper reports. That presumably means emulation, with all the usual yawns and waits.
Console makers often view hardware as a loss leader on top of which games can be profitably sold. Sony could be losing a few hundred dollars every time a console is bought, according to market research firm iSuppli. It would appear that Sony would like to cut its bill of costs although this seems an odd place to start.
The latest news might goes hand in hand with recent mutterings from games developers over difficulties in programming for the IBM/Sony/Tosh-developed Cell processor. Reports also suggest that the Cell will make a complete move to a 65nm process rather than using the current 90nm process.