Although Sony has denied halting production of the 20GB PlayStation 3, according to many retailers the entry-level version of the console has been discontinued and off the order sheets for months now.

Back in March Sony Computer Entertainment America PR head, David Karraker commented on the subject saying:

The 20GB model of PS3 is available in North America, along with the 60GB model. While we make it available to retailers, they are the ones who ultimately place the order for what they want to sell, based on consumer demand. Overwhelmingly, retailers have been requesting the 60GB model, the mix has been about 80 percent 60GB, 20 percent 20GB retailer orders. So, the reason you might not be seeing the 20 GB is simply that retailers have been ordering more of the 60 GB unit.
The 20GB model is not even available on SonyStyle's online store and there is no confirmation on future availability - if any. Although the 20GB, no Wi-Fi, no built in flash memory reader model was not so popular among buyers, it still offered customers a choice other than the more expensive $600 version. Not to mention, it was the most affordable Blu-ray player on the market.