"The biggest threat to the PlayStation 2 is that the Xbox changes the industry's life cycle," said Ando, who feels that it is unclear whether the current PS2 business model is sustainable and that its console life cycle could be reduced to three years as a result.
Although sales of the PlayStation 2 console remain strong, Ando said that the company is still in the process of recuperating its high front-end chip manufacturing costs.
Given his comments, it is not surprising that Ando feels that Microsoft has replaced Nintendo as the biggest competitor for his company's games division. "Nintendo's GameCube has been a disappointment in Japan, they have sold only a third of what they had hoped," he said. "The PlayStation 2 is viewed by gamers as the games console to own."
Ando further stated that although there was interest within Sony to enter the handheld business to compete directly with Nintendo's Game Boy Advance, Ken Kutaragi, president of Sony Computer Entertainment, requested that the company remain out of that market in order to focus its efforts exclusively on the PlayStation 2.
Despite Ando's comments, a majority of industry analysts feel that the PlayStation 2 has strong sustainable potential to become the market leader among the current generation of consoles.
A recent report by the International Development Group forecasted that the PlayStation 2 installed base would grow to 34 million by 2004 in North America, from its current base of 7.2 million units. IDG further projected that the Microsoft Xbox would reach an installed base of about 20 million units in North America by 2004, while the Nintendo GameCube would reach a base of 18 million units in that same period.
Research for and development of the PlayStation 3 is already under way. Sony has partnered with Toshiba and IBM, as part of a combined $400 million, five-year investment, to develop the technology for the PS3.
Production of the chip, at last report, was slated to begin in 2004. According to Sony, the new chip design will be fundamentally different from what the company has used in the past and will have a greater focus on delivering communication and broadband services.