I don't what the original japanese text is, but this translation is actually different:

Said Kutaragi: "If asked whether Sony's level of manufacturing technology declined, I have to admit it under the present circumstance. But Sony intends to prove its technical capabilities by manufacturing the necessary number of blue lasers from now on."

I reckon that actual PS3 hardware is actually very good. Cell is really impressive, if you use SPUs (I do everyday, and love them - would never be able to do 1/10th of what I'm doing with them on "another console"). On the other hand PPU is utter crap, but considering it's the exact same core used in "another console", it's probably not that relevant. RSX is a very decent GPU, despite not matching the ridiculous numbers announced at E3 2005.
The big issue is that Sony seems unable to manufacture the full system.
Disclaimer: I'm somehow biased since I work mostly on PS3. But things I have to complain about are on the software side, not hardware...