In announcing plans to reduce spending on processors by moving production of the Cell processor that powers the PlayStation 3 out of house, Sony yesterday hinted at when a smaller PS3 might become available.

Sony explained that it would be moving from current-generation 90- and 65-nanometre circuits to 45-nm chips in late 2008 or early 2009, meaning that consumers may well see a cheaper, smaller console in two years' time. The earlier PS2 was itself slimmed down by significant hardware changes in late 2004, so the likelihood of a slimline PS3 is high.

The news comes as part of Sony's plans to shift chip fabrication to external producers as it aims to boost its bottom line. Sony said its revenues from chips for the current fiscal year are predicted to be around JPY770 billion (£3.2 billion), mainly from games machines and digital cameras.