Sony's biggest announcement at this week's Electronic Entertainment Expo (E3, the videogame industry's annual bash in Los Angeles) was the development of its smallest concept to date.

PSP (PlayStation Portable), Sony's first hand-held entertainment system, was dubbed "the Walkman of the 21st Century" by Sony Computer Entertainment's corporate leadership and was an unexpected move by the company, which leads interactive entertainment with its PlayStation brand.

"Just as PlayStation revolutionised in-home computer entertainment, we aim to become a new driving force in the portable platform arena," Mr Ken Kutaragi, president and chief executive of Sony Computer Entertainment, told a capacity audience at the company's Centre Studio lot in downtown Los Angeles.

With a tentatively scheduled release date of late next year, the PlayStation Portable will feature a 4.5-inch 480x272 pixel backlit screen, a rechargeable battery source and the Universal Media Disc - a 2.4-inch, 1.8GB format disc.

The new device will compete with Nintendo's GameBoy Advance console, which has sold 950,000 units since its introduction in 2002.

At the Nintendo conference in Hollywood, company president Mr Satoru Iwata denied he was fazed by Sony's announcement.

"We are essentially in control of the handheld market. . . there isn't anything to worry about," according to Mr Iwata.

But the entrance of a third major competitor to the handheld games market suggests that Nintendo may have a fight on its hands.

Nokia has announced October 2003 as the international release date for N-Gage - a mobile deck that will allow for online, multiplayer gaming and also features an MP3 player, stereo FM radio, as well as a tri-band GSM mobile phone.

Well-known titles such as Tomb Raider and Tom Clancy's Splinter Cell were this week announced for the platform.