Sony to sell advanced chip operations to Toshiba inc. PS3 cell CPUs

[Boz]

TOKYO: Sony Corp. will sell its Cell microprocessor and advanced chip operations to Toshiba Corp. for nearly 100 billion yen (US$870 million; ?627 million), next year, a news report said Saturday.Sony will effectively stop making advanced chips, and instead focus on audiovisual equipment, according to a report in Japan's largest business daily, the Nikkei.b>

The deal will likely includmanufacturing lines for the Cell, the microprocessor Sony codeveloped with Toshiba and IBM Corp. for its PlayStation 3 game console, as well as image-processing chips for game consoles and camcorders, according to the report.b>

At the same time, Sony and Toshiba will establish a joint venture that will use these lines to manufacture system chips, the report said.

Although Toshiba will take a majority stake in the venture, Sony will be the principal buyer of the chips and will have a say in the company's management, the report said. Its game unit, Sony Computer Entertainment Inc., could take a stake as well, it said.

The deal, expected in several months, will be worth nearly 100 billion yen, the report said.

Though Toshiba is Japan's largest chipmaker, raking in about 1.3 trillion yen (US$11.3 billion; ?8.15 billion) in sales in fiscal 2006 mainly through flash memory sales, it ranks third in advanced system chips, according to the Nikkei.

Through the planned purchase, Toshiba hopes to boost sales and catch up with foreign chip making rivals such as Intel Corp. and South Korea's Samsung Electronics Co., the report said.

Sony and Toshiba officials were not immediately available for comment

http://www.iht.com/articles/ap/2007/09/15/...ony-Toshiba.php

Well boys and girls it seems that Sony is formulating an exit strategy with PS3 and cell processors. They say they'll be focusing on audio/video equipment.

Very interesting. I was expecting that the PS3 exit strategy might come sooner or later considering how much money they were losing, but this is very interesting news.

[Sheppard]

I always though it was Sony Computer Entertainment Inc that had anything to do with the PS3 not Sony itself, just because Sony has sold the chip to someone else doesnt mean its an exit strategy, IBM knows its stuff, Sony might be able to get cheaper chips from IBM than if it was creating them itself, which in turn could mean price drops eventually?

[Doli]

http://www.iht.com/articles/ap/2007/09/15/...ony-Toshiba.php

Well boys and girls it seems that Sony is formulating an exit strategy with PS3 and cell processors.

This is not the end of the PS3

Although Toshiba will take a majority stake in the venture, Sony will be the principal buyer of the chips and will have a say in the company's management, the report said. Its game unit, Sony Computer Entertainment Inc., could take a stake as well, it said.

[AlphaPrime]

Its game unit, Sony Computer Entertainment Inc., could take a stake as well, it said.

You didn't highlight that. Come on, you think they're going to stop making the PS3? If anything, this deal could make the chips cheaper to produce, like Sheppard said.

[Boz]

Well I'm just conveying news. I think it's really strange that they are selling their chip manufacturing. This is competely weird for a corporation like Sony. This to me smells more like "Cell is a dead end for huge ass devices and PS3 so we better get rid of it now". I've never ever know a business approach where manufacturing chips yourself was more expensive then outsourcing them. Call me crazy, but that doesn't make sense.

Pay attention that they say they will be concentrating on audiovisual equipment, meaning TVs, audio players, possibly Blu-Ray players etc etc. I personally think PS3 is killing them and that they money guys over there had their final word with costs associated to PS3 and other cell devices they produce (if any).

[AlphaPrime]

They may lose money on PS3 hardware, but it's also helping them make money in other parts of the company. Also Toshiba helped make the chip too, now this allows them to make more at a cheaper price (because they have better production capabilities, as mentioned in the article) and sell them to other buyers.

[ntbnnt]

It seems as though this may help make the chips cheaper. It may be more expensive for Sony to make the cell processors than for them to buy the buggers from Toshiba, who apparently can make them cheaper than Sony. If this deal goes down, it would definately lead to price drops on the Playstation 3.

[Sheppard]

Pay attention that they say they will be concentrating on audiovisual equipment, meaning TVs, audio players, possibly Blu-Ray players etc etc. I personally think PS3 is killing them and that they money guys over there had their final word with costs associated to PS3 and other cell devices they produce (if any).

Why is that an issue?

The Playstation 3 isnt something that needs to be continuously updated with new hardware specifications, its a set console design, maybe a few tweaks here and there will come at some point but theres no need for them to completely focus their efforts onto it.

By passing off chip production it can free them up to develop other things, it doesnt mean they are selling it because they think the Cell is a lost cause, why not sell off the chip production, make a load of cash, and still have a controlling stake in it. It frees them up to do other things while still keep a finger in the pie. Like i said earlier it could also lead to higher yields and cheaper production costs.

Sony are known for their audiovisual equiptment, the PS3 is complete, its now the job of Sony Computer Entertainment to make it into something.

Edited September 15, 2007 by Sheppard

[Miuku.]

Well boys and girls it seems that Sony is formulating an exit strategy with PS3 and cell processors. They say they'll be focusing on audio/video equipment.

Microsoft isn't manufacturing 360 on their own, this surely means they're looking for an exit stra.. wait, they've got it all outsourced to cut down costs and concentrate on their core business and allowing majority of their people concentrate on software development rather than have entire plants dedicated to manufacturing all the hardware.

Sony is doing exactly the same - they're outsourcing the production in order to concentrate on their core business. Nothing new here, businesses have been doing this a lot lately.

[Dogan]

Agreed.

"Sony is formulating an exit strategy with PS3" is just a joke.

If anything, this will probably lead to cheaper chips, thus making PS3 cheaper = more sales.

This is good news for PS3.

[Digitalx]

just because they are moving the cell manufacturing to an sourced department shared with toshiba rather then an owned possession and still have a say in it will have no effect on ps3 or it's future strategy or plans. it will bring openness to future chip development between the two if anything will change and probably drive the development cost of cell processor down and further the development of cell in smaller fabrication.

Edited September 15, 2007 by Digix

[Boz]

Personally I think they are aching for money and are trying to clean up the mess. They've sold their insurance company for billions, now sold their advanced chips factory, business is not really booming for anything they've recently developed. You guys might be right, and I'm not saying that it might not be just corporate restructuring, but again, I simply don't see how they will have LOWER costs by outsourcing something that they've built in-house. Sure development costs might improve as they would not bare the costs by themselves, but considering what that high Sony executive said in terms of PS3 failing and Blu-Ray winning the battle, I'm not so sure this is just business as usual.

[betasp]

I simply don't see how they will have LOWER costs by outsourcing something that they've built in-house.

Sony is an electronic company, not a chip manufacturer. Outsourcing is most likely cheaper because they can hire a company that can do it better, cheaper and faster. You will often hear of companies focusing on their core competencies. Do things in-house is not cheaper when you are not the best at it.

[gunnerhkjp]

I think this is part of Sony's semiconductor outsourcing strategy we heard couple of months ago.

Toshiba wanted a factory to consolidate its system LSI production to open up more capacity for its flash memory production, and Sony REALLY wanted to get rid of the money guzzler.