Was it a serious concern that came from external sources or a brilliant hoax initiated by Sony? Conspiracy
There was a "story" around the early days of the PS2 where they claimed something like they blocked PS2s from being imported to Iraq because they could be used for missile guidance.
Yeah, that was all BS hysteria. Iraq imported a few hundred of the systems, to sell, as gaming devices (and DVD players, remember, one of the most popular things for the PS2 when it launched in Japan was the Matrix on DVD). The press was still all up in "How's Saddam going to kill America with his heavily weakened military?" fever (before 9/11, all news out of the Middle East was about Iraq and the no fly zone), so they decided that Saddam was somehow going to reverse engineer the PS2s into missile guidance systems, or a supercomputer. Reverse engineering PS2s into that would have cost as much, if not more, than just building your own system.
Did you know that because of budget cuts, the USA still use Gamecubes as their main NASA guidence system ?
I think the original reason was the MagicGate encryption used in the PS2, but it got corrupted over time. It wasn't because of the power of the machine. Encryption technology is restricted to certain countries due to an export embargo.
Rumors abound during the massive PS2 shortage that lasted for months after system release. These rumors are just spinoffs of those rumors.