Sony mulls outsourcing PSP"We're making the key components here, but we're looking to expand assembly of the product outside of Japan," said Kutaragi, who did not mention any likely candidates for overseas production.

According to a report by the Chinese-language Commercial Times, Sony has already signed a contract for the production of the PSP with Taiwan's largest electronics company, Hon Hai Precision Industry. The two companies have a long-standing relationship, as Hon Hai currently manufactures PlayStation 2 consoles for Sony. The Times said production by Hon Hai would start in the third quarter at the earliest.

Neither Hon Hai nor Sony has commented on the story.

Sony is competing for the handheld game market with Nintendo, which currently holds a 94 percent market share. Thus far, Nintendo has taken the lead in sales of next-generation handheld machines, but it also had a three-month head start on Sony in the United States. According to Bloomberg, Sony has shipped 2.97 million PSPs worldwide from the handheld's December launch until March 31. Meanwhile, Nintendo has shipped 5.27 million units of the DS from its November 21 debut to March 31.