Sources in the UK have confirmed that a successor to the PSP is already well along in development, although the new device probably won't be shown at E3 this year. I suggest that the PSP 2 is coming as soon as this spring.
The PSP 2 is described as roughly half as powerful as a Playstation 3. It will run on a 4 core version of Sony's Cell processor. Little is known about the graphics capabilities of the device, but in my openion it might uses the PowerVR SGX graphics chip.
Even more exciting, the next PSP will contain two cameras built in to the device, with one facing the user and the other pointing away. The same landscape-oriented widescreen is present, but now it is a touch-enabled display. Sony has also retained sleek versions of its trademark face buttons, for those gamers like us who prefer old-fashioned input for our games. Interestingly, there is no word yet on the number (if any) of analog sticks that will be included on this new handheld.
Sony is reported to be finalizing the online connectivity features of the device. It will of course be Internet connected, but the question is, how? A plan to include 3G wireless connectivity in the device is still on the table, and I hope Sony decides to go for it. Similarly, while the basic specifications of the device have been more or less determined, nobody has yet seen the actual case design for the retail device. So, we'll have to wait for sony to show its demon.
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