Sony has had their PSP portable gaming console on the market for some time with many wondering when they would finally get around to releasing a sequel. Well, if you’ve been paying attention you’ll know that rumors have begun circulating which say Sony will announcing the long awaited PSP2 on January 27th in Tokyo but this remains unconfirmed. Now, even more rumors have come our way that focus on the device’s hardware.

According to these rumors, Sony has been telling “licensees” (presumably game developers and the like) that the PSP2 is as powerful as their PlayStation 3 home video game console. As of now this seems like quite a stretch as the PS3 is largely considered the most technologically advanced home console on the market. Then again, Sony has been known to do some crazy things so I wouldn’t count this one out just yet.

Also included in this rumor is the fact that the PSP2 will in fact utilize physical media (something the PSP Go was criticized for leaving out) but that downloadable content will still play a big role for the console.

via mcv

Sony and Toshiba have been cooperating for the Cell processor, the brain of the PlayStation 3. Toshiba had plans of using the cell in some of its products, like TVs, computers and servers, but it never amounted to anything. Instead of trying to figure out what to use the Cell for, Toshiba has sold their Cell chip factory to Sony for 50 billion yen, or $600 million USD.

The factory has made over 30 million Cell chips to date, all used in PlayStation 3 consoles. Sony has said they’ll expand the factory to produce new chips for HD cameras and DSLRs.

Sony is not in the best of positions right now. The company announced its first loss in over a decade and the gaming division had income come down by quite a big margin. Sales of the PS3, PSP and PS2 were also down, but that hasn’t put SCEE boss David Reeves down. In fact, he made a rather silly boxing analogy in this interview, but he also said some interesting stuff – namely, the PS3.

Reeves disclosed that the Cell processor running the PS3 will soon be shrunk down. The current Cell chip is a 65nm one and will soon be replaced by a 45nm chip which will require less power and make the machine run cooler. So, when is this coming? “Probably in [the] middle of the year,” said Reeves.

That would bring down production costs for the PS3, and also might mean a price cut, which is always good for the consumer and the product in question.

Isuppli, the market researchers known for taking apart hardware and gadgets and figuring out how much it costs to manufacture them, have calculated that it costs Sony 448 dollars to manufacture one PlayStation 3 console — which would then retail at 399 dollars.

It might seem like a big loss on each console sold, but keep in mind that the original PlayStation 3 (without the new hardware) cost Sony almost $700 to manufacture.

Isuppli also notes that the newest PS3 version is a lot simpler to make, having only 2820 individual parts, as opposed to a first gen PS3 with a whopping 4048 individual parts. They expect Sony to break even on the PS3 sometime in 2009.

A new book, titled “The Race for a New Game Machine”, paints an interesting story about the development of the PS3 and Xbox 360 consoles, in particular, the processors powering each console.

The authors, David Shippy and Mickie Phipps claim that IBM — who manufactures CPUs for both consoles — used some of the research from the Cell processor it was co-developing with Sony and Toshiba, and helped Microsoft make a CPU for it’s own console, the Xbox 360.

If it wasn’t enough that Sony’s R&D money was spent helping MS, it helped the Xbox 360 beat the PS3 to the market with a full year.

The Wall Street Journal has a full article here. A very interesting read on the early stages of the current console wars.

Engadget reports that Sony and Toshiba will begin production of a smaller 45nm Cell processor sometime next year.

As expected, the smaller version of the chip in the PS3 will result in less heat and power, as well as cost less than the current 65nm chip.

It is expected that the drop in cost of the PS3 processor could lead to price cuts for the console, though that is still some time off.