Support NeoGAF

[Rhindle]

Sony says to cut back sharply on chip spending

Tue Feb 13, 2007 5:33AM EST

TOKYO (Reuters) - Sony Corp. (6758.T: Quote, Profile, Research) will cut back on future chip spending and may not produce advanced "cell" microchips used in its PlayStation 3 (PS3) game gear in-house as it seeks better returns on its investments, a senior executive said on Tuesday.

Improving profitability in its chip division is important for the Tokyo-based electronics and entertainment conglomerate, which aims to hit an operating margin of 5 percent in the business year from April, up from an estimated 0.7 percent in the year to March.

Sony Executive Deputy President Yutaka Nakagawa told reporters that investment in chips would come down significantly from the 460 billion yen ($3.8 billion) allocated over the three business years since April 2004.

"We tentatively plan to start commercial production of 45-nanometre chips in late 2008 or early 2009. We are going to study carefully whether we should carry out all the capital investment and produce them in-house," Nakagawa said.

Sony is already producing these chips using 90- and 65-nanometre circuitry. A nanometre is one billionth of a meter.

Narrower circuitry makes the size of a chip smaller and helps manufacturers cut per-chip production costs. But chip makers are saddled with increasingly heavy initial investments as costs for chip-making equipment balloon.

"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," Nakagawa said.

Such chip makers include Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) (2330.TW: Quote, Profile, Research) and United Microelectronics Corp. (UMC) (2303.TW: Quote, Profile, Research), the world's largest and second-largest contract chip makers.

http://www.reuters.com/article/ousiv/idUST941020070213

 

[Kabouter]

Should've gone to TSMC from the start anyway. In-house production is really only viable for absurdly large companies like Intel.

 

[Rhindle]

Should've gone to TSMC from the start anyway. In-house production is really only viable for absurdly large companies like Intel.

Agreed. Ironically, I got beat upside the head by the Sony fancrowd about a year ago, when I suggested that Sony really shouldn't be in the semiconductor production business.

 

[Defuser]

i hope that means price cut sooner or later

 

[AniHawk]

i hope that means price cut sooner

Same here.

 

[Phife Dawg]

i hope that means price cut sooner or later

A price cut is inevitable, as with every console. I wouldn't expect it in a year's time frame though, outsourcing or not.

 

[VOOK]

Outsourcing the best kind of Sourcing

 

[AlternativeUlster]

Same here.

I however don't want the Ps3 price to be cut.

 

[MutFox]

i hope that means price cut sooner or later

Yeah, hopefully it happens before GT5...

 

[Imperial Hot]

i hope that means price cut sooner or later

I don't think there will be price drops until Christmas 2007.

 

[zallaaa]

I don't think there will be price drops until Christmas 2007.

I think there won't be a price drops until they have recovered a large part of what they have lost either production costs reduce or not.

 

[Shinobi]

Agreed. Ironically, I got beat upside the head by the Sony fancrowd about a year ago, when I suggested that Sony really shouldn't be in the semiconductor production business.

The same crowd also beat up anyone who thought PS3 wouldn't launch last spring, would cost more than $400, would experience the same launch problems as 360 and would have more than one SKU, so at least you weren't alone.

The whole argument for keeping chip production in house BTW (at least from some people), is that it's what enabled Sony to keep their manufacturing costs lower, and thus enabled them to cut prices lower and quicker. So how we're gonna go from that to quicker price cuts via outsourcing is beyond me. That said PS3 is gonna get a price cut by the fall anyway, and probably a significant one.

 

[Vic]

Didn't they've manufactured their own PS2 chips?

 

[gofreak]

The whole argument for keeping chip production in house BTW (at least from some people), is that it's what enabled Sony to keep their manufacturing costs lower, and thus enabled them to cut prices lower and quicker. So how we're gonna go from that to quicker price cuts via outsourcing is beyond me.

Maybe because economics change? This isn't rocket science. In-house manufacturing was indeed an advantage and more economic versus outsourcing with the PS2, for example. Whether that remains the case is in doubt. If you can get something cheaper from someone else, then obviously you should do more of that.

 

[DarienA]

Didn't they've manufactured their own PS2 chips?

Yes I believe they did at first(I vaguely think they later down the road outsourced), which is why I find it strange that folks in this thread are claiming Sony shouldn't have now gotten in the semi conductor business in regards to the PS3(looking at Rhindle for more of an explanation)... Sony has been in the semi conductor business for years. They don't just make chips for their game consoles, they also do it for their cameras, tv's, wireless, batteries(cue joke), etc...

 

[kaching]

Agreed. Ironically, I got beat upside the head by the Sony fancrowd about a year ago, when I suggested that Sony really shouldn't be in the semiconductor production business.

Poor, poor Rhindle. Let's ignore the fact that they clearly say in the article that they had reason not to outsource before this and further that they're not talking about outsourcing until 2008 or 2009, nor does that get them out of the semiconductor business altogether. Times change, as gofreak pointed out, but you suggesting a year ago that Sony should be outsourcing all their semiconductor business isn't timely enough to be handing out I told you so's.

 

[jarrod]

The whole argument for keeping chip production in house BTW (at least from some people), is that it's what enabled Sony to keep their manufacturing costs lower, and thus enabled them to cut prices lower and quicker.

That was with machines like PlayStation and PS2, who's gigantic volumes allowed for quick reductions on a mass scale... PS3 evidently doesn't seem to be going "according to plan".

 

[Scotch]

I however don't want the Ps3 price to be cut.

 

[Panajev2001a]

That was with machines like PlayStation and PS2, who's gigantic volumes allowed for quick reductions on a mass scale... PS3 evidently doesn't seem to be going "according to plan".

Come on Jarrod, this is borderline trolling and a bit uncalled for IMHO .

 

[TheIkariWarrior]

also here


http://news.moneycentral.msn.com/provider/...0213&ID=6473662

Sony to slash chip spending


TOKYO (Reuters) - Sony Corp. will cut back on future chip spending and may not produce advanced chips used in its PlayStation 3 (PS3) in-house, a senior executive said on Tuesday, in a move aimed at driving the semiconductor unit's nascent earnings recovery.

Improving profitability in its chip division is important for the Tokyo-based electronics and entertainment conglomerate, which targets an operating margin of 5 percent in the business year from April, up from an estimated 0.7 percent a year earlier.

Sony Executive Deputy President Yutaka Nakagawa told reporters that investment in chips would come down significantly from the 460 billion yen ($3.8 billion) allocated over the three business years since April 2004.

Sony is already producing the cell chips, dubbed "supercomputer on a chip," using 90- and 65-nanometre circuitry for the PS3, and plans to move onto the 45-nanometre variety by 2009. A nanometre is one billionth of a meter.

Narrower circuitry makes the size of a chip smaller and helps manufacturers cut per-chip production costs.

As the cell, as well as a Blu-ray high-definition optical disc player, have driven up the PS3 price, lower costs for the high-speed chip are expected to help the new game machine better compete with Nintendo Co. Ltd.'s Wii and Microsoft Corp.'s Xbox 360.

But finer circuitry also means heavier initial investments for chip makers as costs for chip-making equipment balloon.

"We tentatively plan to start commercial production of 45-nanometre chips in late 2008 or early 2009. We are going to study carefully whether we should carry out all the capital investment and produce them in-house," Nakagawa said.

SPECIALISTS

"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," Nakagawa said.

Such chip makers include Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) and United Microelectronics Corp. (UMC) , the world's largest and second-largest contract chip makers.

"They are aggressively investing in cutting-edge technology. Our basic understanding is that we probably won't need to do everything by ourselves for next-generation chips."

Revenue at Sony's chip operations is expected to grow 57 percent to 770 billion yen this business year to March, accounting for 9.4 percent of its estimated group sales, although part of its chip sales are made through in-house transactions.

Sales have been driven by brisk demand for microchips used in its game machines as well as in digital cameras, Nakagawa said.

Sony's PS3 sales have so far paled in comparison with the rival Wii.

The Nintendo machine outsold the PS3 nearly three to one in Japan last month, according to video game magazine publisher Enterbrain, which blamed PS3's higher price tag and a shortage of game titles.

Prior to the announcement, shares in Sony closed up 0.2 percent at 6,000 yen, outperforming the Tokyo stock market's electrical machinery index , which lost 0.34 percent.

Sony to cut semiconductor capital spending by 'large amount'


Last Update: 5:06 AM ET Feb 13, 2007

TOKYO (MarketWatch) -- Sony Corp said Tuesday that it would cut capital expenditures at its semiconductor operations by a "large amount" compared with the last three years.
The Japanese electronics giant's capital expenditures in its semiconductor business will be much less than the Y460 billion it spent over the last three fiscal years, said Executive Deputy President Yutaka Nakagawa, who heads the company's semiconductor and component device business.
Nakagawa also said that production of 45nm Cell processors would probably begin at the end of fiscal year 2008 or the beginning of fiscal year 2009. The Cell processor is the main chip used in the company's PlayStation 3 game console.
Nakagawa said Sony had yet to decide whether the 45nm chips will be manufactured by Sony itself or in cooperation with another company.
The Cell processor is currently made using 90nm technology, and Nakagawa said the chips will soon be made with 60nm technology.
In the future, the company's semiconductor operations would focus mainly on imaging devices, which are used in products such as digital cameras, game components and system LSI, which are used in many consumer electronic goods, he said.
Nakagawa added that the company's semiconductor operations were recovering strongly and forecast Y770 billion in revenue this fiscal year through March, compared with Y490 billion last fiscal year.

hopefully this is all good news for once.

hopefully this means poor consumers like me will be able to get a PS3 sometime in the next year or so.

Also, I hope it means less "pain" for the next-generation as PS4 development swings into higher gear.

 

[LuCkymoON]

No need to make more if you haven't sold what you've already produced.

 

[Safe Bet]

Sony Seeks Ways to Reduce Costs of CELL

 

[Doom_Bringer]

Outsourcing could lead to more defective systems, hopefully they can maintain the TQM at the outsourced companies. They have done an excellent job reducing defective systems with PSP and PS3 (so far)