According to a report by Nikkei BP (subscription required), Sony has reduced production of its PSP handheld by 33 percent. The Japanese business-news network says that companies providing components for the PSP were initially told by Sony that it expected to manufacture approximately 18 million units during the current business year.

However, by late April, when Sony released its annual financial report, the company announced it planned to ship only 12 million PSP units--the same number of new slimline PS2 consoles it plans to produce.

Nikkei BP's report stated that the reason Sony would reduce its PSP production plan is unclear, saying that one reason could be a shortage of chips that Sony manufactures at its own plants. However, many industry watchers have speculated that the company is scaling back production because PSP demand is below its initial estimates.

[UPDATE] Sony denies it has reduced its PSP orders in any way. "I'm not sure where the 18 million claim came from," a Sony Computer Entertainment America rep told GameSpot. "We announced in the Sony earnings call that the fiscal year 2005 PSP shipment targets were 12 million units worldwide. We are still on target and there has been no reduction in forecast."

The Nikkei BP article also talks about the PlayStation 3, forecasting that its mass production could begin as early as the end of 2005. However, the paper says full-scale production is more likely to start in the middle of Q1 2006.