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In a Game Industry Biz article today, there are reports that Sony's upcoming portable game system may indeed be equipped with 32MB of RAM.  One source was quoted as saying:

"They've recognised that this is the last hurdle to creating full-strength 3D games on PSP," according to one programmer working on PSP technology. "The system was always nearly as powerful as the PS2, but the lack of RAM was a real worry… This will make developing games much faster and easier. Sony is really trying to make PSP development as painless as possible."

The Complete story can be found here.