A new report confirms earlier rumors that Sony will announce a $399 40GB PS3 as early as this week. According to http://news.sky.com/skynews/xml/article/tech/0,,91221-10259,00.html, a manufacturing source has revealed that Taiwanese FoxConn (which also produces PS2s) will make the rumored $399 PS3. An announcement could come sometime this week in an effort to "spoil" the high profile launch of Halo 3 for Xbox 360 says Sky.
Previous reports speculated that Sony would drop the price of the 80GB PS3 to match the current price ($499) of the now discontinued 60GB PS3. In order to offer a $399 PS3, Sky News reports that Sony will either remove the console's USB ports or backwards compatibility.
Sony denied comment on the report when contacted by GamePro.