Multiple sources have confirmed that Sony is indeed working on an upgraded PS4 that will have upgraded CPU, GPU and RAM to enable better graphics.
Internally referred to as "NEO", but commonly called the PS4.5 or PS4K, there has been extensive rumors surrounding the possibility of an upgraded SKU, but this lateststory by Giant Bomb's Austin Walker is the most credible report yet of Sony's secret plans.
According to Walker's sources, the NEO's CPU will be upgraded to run at 2.1 GHz, up from the current 1.6 GHz. The GPU, currently an AMD GCN with 18 CUs at 800 MHz, will be upgraded to an improved AMD GCN with 36 CUs at 911 MHz. Memory bandwidth of the GDDR5 RAM has also been improved to 218 GB/s, from the current 176 GB/s.
What all this means is that this upgraded PS4 will finally be able to support 4K gaming, as well as upscaling existing 1080p games to the enhanced resolution.
As for how future PS4 games will work, especially in relation to existing "base" consoles, Sony has mandated that all future games continue to work on the base PS4, but can optionally features a "NEO Mode" that turns on enhanced graphical features to take advantage of the newer consoles, including 4K. The framerate of games in NEO Mode must match or exceed the game in base mode on standard PS4s, Sony's documentation also states.
Walker's sources however did not reveal whether the new PS4 will come with a new Blu-ray drive to allow the playback of Ultra HD Blu-ray discs. While this seems to make sense, the added cost of a new Blu-ray drive, plus the fact that Sony's movie studio arm has yet to commit to the new 4K disc format by announcing any releases, means the PS4 NEO could still end up being limited to standard Blu-ray playback.
Meanwhile, Microsoft appears to be working on their own upgraded console, with FCC filings seem to support at least two new Xbox One models. A similar filing from Brazilian authorities supports the same theory with further proof, including photos of the upgraded wireless chipset. The Brazilian filing are also under a non disclosure agreement that expires June 25, the week after E3, fueling suggestions that Microsoft could announce the new Xbox One SKUs at the gaming expo.
One announcement Microsoft has already made is in regards to the Xbox One's predecessor. The Redmond firm has officially confirmed the end of production for the venerable Xbox 360. Sales have been in steady decline for the ageing console, which was first made available over a decade ago, and with the Xbox One now offering Xbox 360 backwards compatibility, Microsoft has very little reason to continue with the now very much outdated console.