Source: http://www.next-gen.biz/index.php?option=com_content&task=view&id=7858&Itemid=59

 But here's the meat of it:

Speaking in an interview with Famitsu, translated by 1UP, Hirai indicated that launching social networking service Home before it was completed would be detrimental to the PlayStation business.

“If anything, we believe the delay would have a positive effect. I personally am not satisfied with the current version of Home. This is a very big project for the PS3 and we want to make sure that we deliver to our hearts content. We hope everyone will look forward to its spring release next year.”

Hirai also noted that the company’s long-term PS3 pricing strategy is to likely match that adopted for its predecessor, with price cuts brought into effect throughout the system’s lifetime, but price reductions won’t occur again until the next-gen console becomes firmly established as a mass-market system with a strong software portfolio.

“When there are more games on the console and the unit itself has also shipped a fair number, one trend is that we are able to reduce the costs. When games of different genres have been released, some of these will appeal to the masses and this is when we have to consider a pricing which would appeal to these types of audiences. This is a common trend so the PS3 doesn't need to go against such trends.”

Hirai went on to put on a brave face in light of Capcom’s recently announced decision to release the previously PlayStation 3-bound title Monster Hunter 3 exclusively on Wii.

“It is my understanding that it is up to the game companies to make business decisions on which platform to release their titles. The series has helped in the success of PS2 and PSP. Capcom has plans to release Monster Hunter Portable 2G for the PSP in March '08 [in Japan] so we hope to continue our partnership with the company.”

I was thinking about this earlier today ...

If Sony has any intentions of turning a profit off of the PS3 it is fairly unlikely that we will see further price reductions in the next 12 months; they really need to reduce the cost of manufacturing to a level where the existing models are turning a profit before they cut the price again.

 well you should note that the CELL is running on a 65nm wafer now but the RSX is still at 90nm. Once the RSX drops to 65nm manufacturing costs will decrease quite a bit. 

@ssj12, it has be shown that in fact the hardware in the 40g is still 90nm. Not 65nm as was originally rumored.

source 1
http://www.trustedreviews.com/gaming/news/2007/11/06/40GB-PS3-Still-Using-90nm/p1

source 2
http://www.bit-tech.net/news/2007/11/06/40gb_ps3_features_90nm_cell/1

EDIT: Now Sony has said they 65nm chips will be rolling out soon. But, as of yet this is not the case. 

I think people focus too heavily on the manufacturing process as some "magical" cost cutting procedure ...

By switching to a 65nm process from a 90nm process Sony will save about 50% on the physical manufacturing cost of the chip alone, but this is only one portion of the actual cost of the chip. Sony did not develop the RSX and it is unlikely that they bought the design from nVidia so they're probably paying a licencing fee on the chip; we have no idea what the terms of the licencing agreement are, but it is (typically) reasonable to assume that either the licencing fee is a flat rate (like it was with the XBox, which is why Microsoft did not use nVidia with the 360) or it is dependant on the volume of chips produced.

Now, we don't know what Sony actually spent on manufacturing the PS3 but a year ago it was rumored to be $800 to $900 per system; this means that in order for them to be breaking even on the 40GB model they would need to realize $400 to $500 worth of cost reductions which I'm certain they haven't (and probably won't in the near future).

Yeah, switching to the new chips is more of a long term cost reduction. In the short term you have to recoup R&D and retooling costs for the switch. While the actual manufacturing costs go down, the overall costs may not change for quite some time before savings are realized.

Even then, if sales volumes remain light, costs can actually go up as economy of scale is lost.

So basically. Kaz doesn't think the PS3's lineup is diverse enough. Or atleast that's what i get by "pricedrops won't come in effect until the software is more diverse and ships more."

Pricecut come LBP?

The thing bothers me about Sony's delays isn't that they're delaying the software. I think we can all agree that there is very few circumstances when a delay isn't a positive thing overall. My problem is with the fact that they announce delays very late -- well after the point for which it would be obvious the game is going to be delayed.

I can see some reasoning for this. The longer you wait, the more accurate your new release date will be. However, this is a far more insidious reason. Sony may want people to believe something is about to come out, even if they know it isn't close, because impending releases can sell consoles to certain people. So in this way, it's in Sony's interests to hide the fact that games are going to be delayed until as late as possible, then announce the delay and focus on the fact that it's a quality thing.

Home looks very ambitious. I think this is something Sony fans will be waiting for until 2009 or later.

As far as cost people are forgetting that the while PS3 was happered by essentional being two expensive things straped together(blu-ray + game system) it has the advantage of realizing cost savings from both.

Assuming $900 cost where it was a $400 game system $400 blu-ray player and $100 shared components. The shared componets have probably stayed the same but I imagine that both the game system items(chips) and blu-ray components(diodes and what not) have both decreased in cost. I have heard the systems are somewhere in the $500-$550 range to produce now. No I don't have sourcfes but that seems reasonable that they are still losing money but not much. The 40 GB is probably $50 cheaper than that.

However now that prices are coming down it gets harder and harder to cut. So I am thinking it will be until next year until they are turning a slight profit. It took MS about 2 years and they are still cutting it pretty close with the last price drop. So don't expect a price cut in 08 unless the PS3 is in it's death throws.