Report: Sony To Consider Outsourcing Cell Production

A Sony Japan executive has revealed that the company is planning to cut back on future chip spending, and may elect not to continue to produce the Cell processor in-house as production of the PlayStation 3 continues to ramp up. A Reuters report quoted executive deputy president Yutaka Nakagawa as saying that investment in chips would be significantly reduced from its current total of ¥460 billion ($3.98bn) over the next three years. The move is apparently an attempt to encourage an earnings recovery from the group’s semiconductor division. "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. "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." The expensive and complex-to-produce Cell chip acts as the central processing unit of the PlayStation 3, and is currently manufactured using 90 and 65 nanometer circuitry. Sony intends to move to cheaper 45 nanometer manufacture by 2009. "We tentatively plan to start commercial production of 45-nanometer 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," said Nakagawa. As well as helping Sony’s semiconductor division, the move to 45-nanometer production should make a substantial price cut for the PlayStation 3 easier. Revenues from the company’s chip operations are expected to rise by 57 percent to ¥770 billion ($6.35bn) this business year, accounting for 9.4 percent of the company’s overall business.