Report: Sony cutting back chip spending

February 16, 2007 – Sony Corp. plans to slash its chip spending in the next few years, and may look to outsource production of the next version of chips used in its PlayStation 3 gaming console, in a move to improve profitability, according to a Reuters report.

Sony already makes 90-65nm Cell chips for the PS3, and plans to move to a 45nm version in late 2008 or early 2009. Sony spent about $3.8 billion on semiconductor investments in the three years since April 2004, but those investments are likely to come down “significantly,” Nakagawa said.

“We are going to study carefully whether we should carry out all the capital investment and produce them in-house,” said Executive Deputy President Yutaka Nakagawa, quoted by Reuters. “When we first offered the PS2, there were no semiconductor companies that were able to make chips for the machine, so we did it ourselves. But now, there are companies that specialize in chip production.”

The company is looking for ways to improve profitability, from just 0.7% operating margins in its latest fiscal year to about 5% in the year from April. The PS3 has struggled to compete with rival systems from Nintendo and Microsoft — Nintendo’s Wii outsold the PS3 nearly three to one in Japan in December due to the PS3’s higher price tag and a shortage of game titles, Reuters said, citing video game magazine publisher Enterbrain.


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