Report: Sony exiting Cell production through Toshiba JV

September 17, 2007 – Reports from Japanese media indicate Sony has finally decided to get out of the Cell processor production business, outsourcing production to a new JV with Toshiba instead.

Under the proposed deal, reported by the Nikkei daily, Sony would sell system chip fabrication lines at the Nagasaki Technology Center (in Isahaya, southwestern Japan) of its subsidiary Sony Semiconductor Kyushu Corp. to Toshiba for nearly 100 billion yen (about US $870 million) as early as next spring. Likely included in the deal will be lines producing the Cell microprocessor lines, as well as image-processing chips for game consoles and camcorders. All the equipment would stay in the facility, with only ownership being transferred.

Meanwhile, a proposed joint venture between Sony and Toshiba (majority owned by Toshiba) would use the lines to fabricate system chips, with Sony the primary product buyer. Sony also will have a say in the JV’s management, possibly with its game unit Sony Computer Entertainment Inc., the paper noted.

The announcement heralds “a major change” in the semiconductor strategies of Japanese chipmakers, who have invested huge amounts on manufacturing to supply chips for their other electronics products — but that spending has also weighed down profitability, because those chips are consumed internally and not sold to outside customers, the Nikkei daily noted.

Sony has spent roughly 200B yen (~$1.74B) on facilities to fabricate the Cell processor, but investments were expected to soar with a shift from 90-65nm processes to the next version of Cell chips using 45nm processes. So, earlier this year Sony indicated it would likely “significantly” reduce semiconductor investments from recent years, including outsourcing production of upcoming versions of its Cell chips. And weeks ago Sony officially shifted some of those investments to focus on its imaging sensors.

Still, Sony will maintain development capabilities, including chip design, perceiving these operations still add value to finished products, the paper reported.

For Toshiba, a top flash memory producer, the deal will boost its system chip business, where it currently ranks third, in order to catch rivals including Intel and Samsung, the paper noted.


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