Cell Chip-SSEPT. 16, 2007 • The Financial Times reported that Sony was in negotiations talks to sell its advanced semiconductor fabrication facilities to Toshiba, including the production lines for the Cell microprocessor that powers the PlayStation 3. The cost of such an acquisition was estimated at ¥100 billion ($866 million). Sony invested ¥200 billion ($1.732 billion) to develop its Cell architecture. The Nikkei business daily in Japan reported Sony will effectively stop making advanced chips, and instead focus on audiovisual equipment, and will set up a joint venture with Toshiba that will use existing manufacturing lines to make system chips for Sony and others. Although Sony representatives refused to confirm any talks with Toshiba, and that nothing had been decided in regards to its semiconductor business, spokesman Tomio Takizawa told the Associated Press that Sony has been exploring ways to streamline its advanced chip business since early this year.

Impact: The cost factors underlying the development of the PlayStation 3 are coming home to roost. The risk Sony took was that its PS2 market share would force consumers to buy a substantially more expensive PS3 in equally large numbers. Unfortunately, that assumption turned out to be wrong and Sony finds itself in third place with a console running a processor that cost ¥200 billion to create. Whether Sony sells its semiconductor business, or not, the company has been forced into a cycle of trimming costs wherever it can on existing technology, and will likely exhibit far less monetary hubris on future technology.