An interesting article.
Sony to sell PS3 chip production lines to Toshiba
By Reuters
[Link: news.com] Story last modified Thu Oct 18 05:39:25 PDT 2007
In an effort to focus more intently on core operations, Sony will sell its production facilities for making microprocessors and graphics chips used in its PlayStation 3 game console to Toshiba.
The price and other details have yet to be set, Sony said on Thursday, but sources familiar with the transaction say the price is likely to be in excess of $858 million.
Despite the planned sale of the manufacturing facilities for key PlayStation 3 chips, its video game operations remain one of Sony's core businesses, Sony spokesman Daichi Yamafuji said.
The electronics and entertainment conglomerate plans to sell to Toshiba its Cell microprocessor production facility in Nagasaki prefecture and RSX graphic chip production line in Oita prefecture, both in western Japan, by March 2008.
Sony also said it would cooperate with International Business Machines in developing the next-generation Cell chip--part of a strategy to advance development of the key PS3 engine while cutting exposure to costly microchip assets.
Developing more-advanced and less costly PS3 chips is critical for Sony's loss-making game business because cutting-edge components of the console, including its Cell chip and Blu-ray high-definition DVD player, have driven up the price for buyers, dampening demand.
Sony, which also offers Cyber-shot digital cameras, Vaio PCs, and Bravia flat TVs, said in February it would cut back on chip spending and might not produce an advanced version of Cell chips with 45-nanometer circuitry in-house.
A nanometer is one-billionth of a meter.
Narrower circuitry makes the size of a chip smaller and helps manufacturers cut per-chip production costs.
But finer circuitry also means heavier initial investments for microchip makers as costs for chip-making equipment balloon.
Toshiba, Sony, and Sony Computer Entertainment--Sony's video game unit--plan to set up a joint venture next April to run the Nagasaki facility that will be sold to Toshiba.
Sony's PS3 has lagged behind Nintendo's Wii in sales since their launches late last year due to the Sony machine's high price and scarcity of strong game titles, weighing on its group-wide earnings.
Sony, which is in the final year of its three-year turnaround plan under Chief Executive Howard Stringer, has been shedding its noncore assets aggressively.
Earlier this year it cut its stake in online broker Monex Beans Holdings, and last year sold interests in a wide range of retail activities such as cosmetics and restaurants.
Before the announcement, shares in Sony closed up 0.6 percent at 5,430 yen, while Toshiba lost 0.2 percent to 1,015 yen, underperforming the Tokyo stock market's electrical machinery index which rose 1.05 percent
