IBM announced today that it is beginning production a 65nm version of the Cell processor, which is a good bit smaller than the 90nm version used today. A smaller chip could also lower power consumption and lower production costs.

This news should not, however, get your hopes up for a price drop in the near future. The PlayStation 3 continues to be a hefty loss leader for Sony, estimated to cost $840 to manufacture. Sony is also gearing up to rip the PS2 hardware out of the PS3s to help with the European launch.

Historically, consoles have never seen a price drop in its first year. Will the rumored 2009 price drop, coinciding with the 45nm Cell chip, prove fruitful? It's certainly a lot more likely than seeing the console slash prices anytime soon.

[Via Engadget; thanks, Michael Chomiczewski]

This article was originally published on Joystiq.