I recall reading that the factory will continue to be operated by Sony until March 2008.

^oh.

maybe they are just pulling "a nintendo", by which i mean saying they are sold out all the time. which is kind of true for nintendo (it's usually reggie saying it so it's especially true in USA).

Sony says "40g will be supply limited"...oh wait, it's not Sony saying it by looking at the OP. *checks link*
ahh no wait, it is Sony; "However, sources say they have been warned by Sony reps that there will be production limitations on the new $399 PS3. Sony is expected to put most of its energy into generating its higher-end models, as they offer a better return on investment."
So they are intentionally making supply low.... GITS.

I hope they mean low supply and not high demand.

let me guess, they will have the 40 gig in america this year, then when it doesn't sell well (even if they all sell out, sales will be far behind 80 gig) they will claim that people just wanted the 80 gig then they will lower the price on the 80 gig to 400 in fall 08 and have some $300 model for the 2008 holiday season that is gimped and supply constrained.

They just put out these models that they know will not sell well so that it looks like they have a low price when very few people actually will even want to buy them. They take much bigger losses on the 40 gig (same with the 20 gig) but they will probably only supply 1 40 gig for every 10 80 gigs.

So everyone here is basing their bashing of Sony on this "source". Umm... if it isn't Jack Tretton or Kaz Hirai saying this about Sony, then why should anyone believe it?

But why should we believe Jack "You cant find a PS3" Trenton or Kaz "60gb isnt dead" Hirai?

Sony still has a 40% share in the toshiba deal. Besides IBM is also producing the cell for Sony.

@sinear

 I'd definetly believe them over a "source", cuz there has been a lot of Sony bashing (agreeably so) but I don't think they'd announce a new model and take away features to only produce a little and force people to buy the $500 one. The point of taking away features and lowering the price was so that people who couldn't afford one, now could.

@DMeisterJ, didn't you read the part saying this comes from "Sony reps"?

If Sony actually does that, it'll be hard for me to decide whether I'm surprised by it or not!

One thing's for sure, it sounds like an extremely stupid plan considering that they really need to increase sales. And I don't see any excuse they can give considering they had many months to stockpile the higher-specced models, so they should be manufacturing 40 GB units only now! What do you guys think?