Sony
Sony chip deal signals major strategy shift
Arch rival Toshiba gains access to top secret workings of the chip powering the PlayStation3 console.
Sony is to cede control of the facility where it makes the “Cell” – the advanced supercomputer chip that powers the PlayStation3 console – to its arch rival Toshiba.
The two companies plan to set up a 100 billion yen (£400 million) joint venture early next year to handle the technology transfer, which analysts described as a “major shift” in Sony strategy.
The deal will also give Toshiba access to the ultra-secret RSX chip which produces the PlayStation3’s complex graphics. The joint venture will be formed despite the fact that Sony is locked in a bitter “format war” with Toshiba that is becoming dirtier with every passing month.
The two companies lead rival consortiums, each backing a different standard of next-generation DVDs and each desperately seeking the exclusive backing of the major Hollywood and Asian movie studios. Sony’s Blu-ray discs have received a major boost because a player is built into the PlayStation3; Toshiba is expected to hit back with an ultra-cheap player of its HD DVD format discs.
Toshiba, which originally helped Sony develop the Cell chip, will first work on shrinking the chip itself and later use the semiconductors in devices such as televisions and PCs. Toshiba is itself involved in a programme of re-inventing itself as a chip and flash memory specialist.
Sony’s move is the latest in a series of dramatic reforms of Sony’s sprawling business mix wrought by Sir Howard Stringer, the group’s first ever non-Japanese chief executive who took over the ailing company in 2005. Sony described the establishment of the joint venture as “process migration” – a strategy which, analysts said, was likely to see Sony disposing of more facilities in the future.
As well as seeking to improve communication between the various divisions of Sony, Sir Howard set a target of achieving group-wide profit margins of 5 per cent by next year. While the electronics and movie businesses were on track to hit that target, the massive losses arising from the PlayStation3 – the games console whose price has now been slashed in both the United States and Japan – has made the task more difficult.
Analysts believe that Sir Howard is gradually moving Sony away from the historical business model where it would, wherever possible, produce the main components of its electronics equipment at its own facilities.
The costly development of the Cell chip, which involved IBM as well as Toshiba, is viewed by many investors as a prime example of the sort of expense that Sony should now seek to avoid where possible.
The money raised from the sale of the chip plant is expected to be poured into the consumer electronics business. The sale of the chip plant comes just a week after Sony raised around 300 billion yen via the market flotation of its online banking and insurance business, Sony Financial.
(Published by Times Online, October 18, 2007)
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