According to analyst P.J. McNealy of American Technology Research, final assembly of the PlayStation 3 is now in full swing. Although Sony has had production issues because of shortages of blue laser diodes, causing the firm to cut its worldwide launch figures to just 500,000 units, McNealy is "upbeat" about Sony meeting its goal of 2 million PS3s shipped worldwide by the end of December. Sony is targeting 6 million PS3s shipped by the end of its fiscal year next March.

"We believe this production news should put to rest any risk of a push-out of the PS3 launch in North America or Japan in 2007, and we are incrementally more positive on the sector," McNealy noted.

He continued, "It is our opinion that given the 13 weeks or so of production time, SNE can still come close to its forecast of 2MM units worldwide by the end of December. We believe this likely means a split of 60/40 (1.2MM/800k) for North America/Japan for shipments, which are counted when invoiced off the SNE factory floor. Our research indicates that typically 10-20% of the unit shipment forecast will likely still be in the channel (en route) at the end of December and not installed in homes yet. The low end of that range is more likely simply because SNE will likely still be air-freighting and not tanker-shipping PS3s at that point."

While McNealy seems positive on PS3, Sony was hit with some more negative news today because of overheating problems with some of the hardware at the recent Tokyo Game Show (TGS). According to the Associated Press, PS3 units at TGS "operated erratically and had to be repeatedly reset," which the news service labeled as the "latest embarrassment for Sony."

"While the reason for this is unknown, we suspect it may be due to overheating as a result of enclosing the units and the high temperatures at the venue," Macquarie Equities analyst David Gibson said. "We are concerned that such a problem has occurred so close to full production and is clearly negative news for the company."

Sony spokeswoman Nanako Kato, however, denied that there's any problem with the PS3 hardware. There were about 200 PS3s at TGS, and when combined with the other platforms and electronics under the same roof without proper ventilation, the atmosphere likely led to temperature irregularities—an occurence not that uncommon at trade shows. "It's not a problem with the PlayStation 3 unit itself," Kato told the AP. "For a normal player at home, there shouldn't be any problem."

The concerns about PS3 hardware brought Sony shares down 2.75 percent Tuesday to 4,600 yen ($38.98) on the Tokyo Stock Exchange.

[UPDATE] GameDaily BIZ spoke with an industry source that attended TGS and this person actually suggested other reasons for the technical problems the PS3 experienced at the show. Apparently, although the PS3 hardware was final, the console's operating system was not. In addition, and this reason is rather obvious, many of the PS3 games being shown were in an unfinished state and were therefore prone to more glitches. Combine these factors with the unfriendly trade show conditions mentioned above, and it's easy to see how the machines could malfunction. We've pinged Sony to see what they can tell us about the state of the PS3's OS at the show.

[UPDATE 2] Sony hasn't yet answered our OS question, but Dave Karraker, Sr. Director of Corporate Communications, SCEA, did follow up with us regarding the reports of overheating PS3s at TGS. Below is his official response: