Anyone who says the GS can't be emulated is ignorant and/or a troll. Sony has access all of the documentation on the architecture of the chip, which means even entry-level programmers at Sony could produce an emulator with enough time. Yes, it's an exceptionally complex chip, and actually would require experienced programmers to make it function well and have it completed in a reasonable time. But, if amatures can build emulators for processors they don't have full documentation for, Sony can build an emulator for their own chips. And it's really that lack of documentation (and, to a degree, eDRAM) that keeps hackers from producing a fully working emulator.
The reasons why it hasn't happened yet have been covered in part by SpartanFX, since the lack of BC does encourage further PS2 sales while it does little to harm PS3 sales since most people who buy one still have a PS2. Frankly, it's not good business sense to put a lot of resources into rushing it out when they need to rush out new games instead. It'll come, but at a time when it doesn't detract from PS3 software sales and PS2 hardware sales. All things said, it's not worth the effort yet, but that doesn't mean it won't be.
Oh, and Fishy, for it to be more expensive than keeping the GS is a pretty tall order. If they produced only 20 million 40GB units then your suggestion would mean that the emulator would cost more than $60 million to program. Considerign the fact that they essentially already have the plans for how the emulator should be built (since they know how the chip was build) you're suggesting they'd have to devote a couple million man-hours to program it. I think your suggestion is a bit ridiculous.
@Deviation59
So that you know, every cell chip comes with a small amount of eDRAM. Less than the GS, but enough to make a work-around possible.
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