Sony to slash chip spending

Sony executive Yutaka Nakagawa has unveiled plans to cut the costs incurred from manufacturing Cell chips for the PlayStation 3 by outsourcing their production.

Over the last three years, Sony has invested US$ 3.8 billion in the chips - but according to Nakagawa, that level of funding is set to drop now that there have been changes in the market.

As reported by Reuters, Nakagawa told a press conference, "When we first offered the [PlayStation 2], 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 specialise in [such] chip production.

"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."

Nakagawa also said that Sony plans to start producing 45nm chips "in late 2008 or early 2009". At present, Cell chips use 90nm circuitry and producing begins on 65nm chips; change to 45nm would help to cut production costs. However, manufacturers would need to buy new machinery to make the smaller chips.

"We are going to study carefully whether we should carry out all the capital investment and produce [the 45nm chips] in-house," Nakagawa said.

Reducing the cost of the chips will be key to improving Sony's financial figures - the company plans to raise its operating margin from 0.7 per cent to 5 per cent in the year beginning in April. Lower costs could also make it easier for the company to cut the price of the PlayStation 3, which will cost GBP 425 / EUR 599 when it launches in Europe next month.