SEPT. 20, 2007 • Sky News cited electronic manufacturing news sources in Taiwan indicating that Sony had engaged Taiwanese manufacturer FoxConn to produce the rumored 40GB PlayStation 3. FoxConn already produces PS2s for Sony. ASUSTeK, which already produces 80GB PS3 for Sony, is expected to continue doing so. On Oct. 6 SCEE announced that it would launch the 40GB model at €399 on Oct. 10. Unlike other models, the 40GB PS3 has no backward compatibility, two fewer USB ports, and no multi-memory card port. The price of the current 60GB model was reduced €100 to €499, and will remain on sale until stock is depleted. SCEE did not say when the 80GB model would debut in Europe, nor was there any mention of when the 40GB model would appear in the U.S.

Impact: One downside of globalization is that it is much harder to keep trade secrets when production, distribution and content require many partners worldwide. Especially when Sony must reduce the price of the PS3 in face to consumer resistance to console’s original value proposition. The arrival of the 40GB model is a good sign that SCE understands reality and has taken swift steps to bring the PS3 in line with consumer expectations. The choice of Europe to launch the 40GB model is also wise given reception on the continent to the 60GB model was cooler than in the U.K. Launching in Europe also helps to mend the ruffled feathers of consumers sick of getting new next-generation consoles months after Japan and the U.S.