Sony has finally revealed why the European version of its PlayStation 3 console has poorer backwards compatibility than the US and Japanese models. It's all to do with a Sony-built microchip, cited as one of the components that has kept the price of the console so high.

Sony is removing the chip from the European model in a move which will cut production costs, but will also limit the console's ability to play as many Playstation 2 games.

The PlayStation 3 will ship in Europe on 23 March, and will cost an unprecedented £425 to all UK buyers. That's more than some fully-equipped home computer systems.

Despite being significantly cheaper in the US and Japan than it will be in Europe, it still costs twice as much there than the Nintendo Wii.

Share rise

The data-processing chip cut out of the European PlayStation 3 means engineers will either have to devise a solution to get the console working with older PS2 games - or that Sony will face some unhappy customers.

Sony shares rose close to 3 per cent when the company made the announcement. The PlayStation 3 project has been a major factor behind Sony's games unit running £800m into the red this financial year. The company says its aim is to turn the games arm into a profitable enterprise again by the end of the next financial year, in April 2008.

In a further cost-cutting measure, the Japanese company is planning to integrate new 65 nanometre cell processors into future PS3 models, replacing the current 90-nanometre circuitry.