Sony to Offload Cell PS3 Chip Plant to Toshiba

By Scott M. Fulton, III, BetaNews

October 18, 2007, 11:15 AM

It is one of the crown jewels of what is known in Japan as "Silicon Island" - a major processor fabrication facility on Nagasaki, where employees are said to take lunch breaks by walking out the front gates, through the private golf course, and alongside the ocean. In 2001, it was part of Sony's multi-billion-dollar consolidation of three of its manufacturing entities into what was planned to be a single, global powerhouse, setting new standards for efficiency and quality control.

This morning, as part of a different kind of corporate consolidation altogether, multiple Asian news sources report that Sony's Kyushu semiconductor division has agreed to sell 60% of its 300 mm Nagasaki fab -- the key facility in the manufacture of the Cell BE processor that powers the PlayStation 3 -- to Toshiba.

The Memorandum of Understanding, reportedly signed yesterday, would divide Sony's remaining share of the facility between two divisions, with a 20% stake going to the corporate home division, and 20% to Sony Computer Entertainment, the PS3's parent.

Rumors of the sale had been confirmed by some sources and denied by others last month. However, the details of those early reports were actually wrong, having jumped to the conclusion that Toshiba would end up owning all of Kyushu's Nagasaki facility.

If the actual deal -- not the rumored one -- goes smoothly, the intent is for production of the PS3's central processor to proceed as before, or perhaps better than before. It doesn't sound so smooth when you examine the math, but given that Sony apparently had trouble managing its own fabrication operations centrally, there's a good chance Toshiba may do a better job of it.

Reports say that the deal would establish a new joint venture, yet to be named, with Toshiba owning 60% and its executives picking the leaders. Sony still retains principal possession of the Cell's design and intellectual property, though as a whole, the Cell's IP is already shared between Sony, Toshiba, and IBM (which contributed the Power processor core design).

Oddly, with SCE now with a 20% stake, the PS3 division's management ability of the Kyushu operations could actually increase as a result.

Meanwhile, one of Sony's other operations that before 2001 had been consolidated into its Kyushu manufacturing arm, becomes its own entity again, according to reports. And that entity -- the spun off Oita TS Semiconductor -- will be controlled by a separate joint venture in which Toshiba controls 51%, and various interests of Sony the other 49%. That's important because Oita will continue to build accessory parts of the PS3, giving Toshiba management oversight over far more than just its CPU.

While Toshiba executives tell Asian business newspapers the move will give it the opportunity to expand its CMOS manufacturing operations, it also gives Sony some breathing room to concentrate on shoring up its lagging marketing strategy for the PS3 - the part of the job that neither Toshiba nor anyone else right now besides Sony seems to want.