Financial Times reported yesterday that Sony is in talks to sell its advanced semiconductor facilities to Toshiba in a move that would represent an effective retreat from high-end semiconductor fabrication. This strategy is in line with Sir Howard Stringer’s desire to slim down the industry giant and if the deal with Toshiba goes well, Sony may stop making advanced chips and instead focus on audiovisual equipment come 2008.
People familiar with the matter said on Sunday the two companies were discussing the sale of Sony chip fabrication facilities, including production lines for the “Cell” microprocessor used in Sony’s PlayStation 3 video games consoles. The cost to Toshiba of acquiring the facilities is expected to be about Y100bn ($866m).
The discussions highlight growing pressure on Japanese semiconductor manufacturers to address their lack of global competitiveness, particularly in the system LSI market, including microprocessors.
“We are considering many options for strengthening our systems LSI operations,” Toshiba said. Both Sony and Toshiba declined to comment on the talks.
The move would be in line with Sony’s strategy of slimming down its non-core assets. Sir Howard Stringer, Sony chief executive, indicated this year that Sony, which has invested more than Y200bn in developing the “Cell” chip, would cut back on chip spending.
Sony, which is in the final year of a three-year turnround plan, is moving to a “fab-lite” model and outsourcing non-core components, in line with the trend in the semiconductor industry. Japanese semiconductor makers have struggled to compete profitably in the system LSI market, which is dominated by companies such as Intel and IBM, due to a lack of champion products.
System LSI chips entail huge investment costs but, since the chips are customised for applications, unless they can be sold in large quantities, it is difficult for the manufacturer to recoup costs. The “Cell” chip, which is as powerful as eight Intel microprocessors put together and is known as a “supercomputer on a chip”, is the PS3’s most expensive component.
Slower-than-expected PS3 sales and the lack of other large-scale commercial applications for the “Cell,” which was developed jointly by Sony, IBM and Toshiba, have kept the chip’s costs high.
Toshiba is Japan’s largest semiconductor maker with Y1,300bn in semiconductor revenues, of which system LSIs provide about 40 per cent. However, the system LSI business is not as profitable for Toshiba as the memory chip business and the company faces a need to improve profitability.
Japanese semiconductor makers have fallen behind larger competitors, such as Intel and IBM, in the system LSI market due to a lack of champion products.
The growing gap between winners and losers in the semiconductor industry has spurred calls for NEC Electronics, Toshiba and Fujitsu to pull together their system LSI operations, said one Ministry of Trade, Economy and Industry official.
The Ministry of Trade, Economy and Industry is also calling for semiconductor makers to set up a joint fab in order to improve Japan’s global competitiveness, he said.
(News Source: Financial Times)
