Yes, but in the early months the PS3 was supply limited as well. Does that mean it would have sold much, much more if it hadn't? Probably not. The point is that the price is an important factor, and we'll have to see how demand and price are matched.
PS3 needs good games to boost demand, and then a pricecut to fuel that demand and reach a large audience. But it only needs to match this to production capacity. They have been out for 11 months now, and theoretically they could have made 11 milion consoles. I don't know if they have, but if they did make that many, then they'll have to sell them.
Let's say they sold about 4 million, and will sell 2-3 more in the last few months of the year (across all regions). Then the surplus stock they have is still a few million, minus what they sell in sept/okt (not a whole lot probably, though you never know with the soccer games being released in Europe). That's still a big surplus and it's becoming increasingly unlikely that they can sell the whole lot for full price.
What I am guessing is that they slowed down production considerably and are using the lull for reducing costs and improving the factory line, just as I'm sure Microsoft has been doing in the first half of 2007 when they too had a very 'comfortable' stock.
The question remains how software is going to change things, but it is also clear that they'll need to reduce price. I'm not worried about the software at this point, with plenty of good stuff coming out now and the next months, so the major question that remains is getting the cost of the machine down. If they manage to do so (to say, 399, which I think is a good target to hit for Christmas), then we can see how that matches demand.
The extra cash that Sony has been known to get into gear could in that respect just as well be to compensate for having to sell surplus stock of PS3s that were built while the PS3 was more expensive to make.
Having said all that, above all, I expect console gaming to grow considerably over this generation. Perhaps the biggest absolute growth ever.