Sony to shrink future spending on PS3 chips

  • By Staff, News.com
  • Posted Feb 13, 2007 10:39 am PT

In cutting the costs of producing the Cell chip to compete with the 360 and Wii, Sony may opt to have the "supercomputer on a chip" made by other companies.

From News.com

Sony will cut back on future chip spending and may stop in-house production of the advanced chips used in its PlayStation 3, a senior executive said Tuesday.

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

Sony executive deputy president Yutaka Nakagawa told reporters that investment in chips will come down significantly from the $3.8 billion (460 billion yen) allocated over the three previous business years.

Sony is already producing the Cell chips, dubbed "supercomputer on a chip," using 90- and 65-nanometer circuitry for the PS3, and it plans to move onto the 45-nanometer variety by 2009. A nanometer is one billionth of a meter. Narrower circuitry makes the size of a chip smaller and helps manufacturers cut per-chip production costs.

Components such as the Cell chip and a Blu-ray DVD player have driven up the PS3's price--the high-end 60GB model retails for $599 in the US. Lower costs for the high-speed chip are expected to help the new game machine better compete with Nintendo's Wii and Microsoft's Xbox 360, which currently retail for $249 and $399, respectively.

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

"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," Nakagawa said.

"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 specialize in (such) chip production," Nakagawa said.

These chipmakers include Taiwan Semiconductor Manufacturing Co. and United Microelectronics, the world's largest and second-largest contract chipmakers, respectively.

"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 said.

Revenue at Sony's chip operations is expected to grow 57 percent to $6.35 billion during the current business year that ends in 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 chips 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 the lower sales on the PS3's higher price tag and a shortage of game titles.

299 Comments

  • galoku

    Posted Mar 29, 2007 3:49 am PT

    i dont think its cheaper-lower quality chips.. its just the same stuff produced in a more efficient way.. but who knows.. we may endup with a very costly heater instead (* . *)

  • ColdfireTrilogy

    Posted Mar 23, 2007 7:48 am PT

    lol if this trend keeps up each console developer instead of going for hte most powerful console is gonna be like. "We are making the cheapest console available, our newest console will retail for only $35.99 respectively with a 128meg HD addition costing ONLY and additional $5.00" This console will be on par with PS2 graphics and will have 4 gyros which will move at the same time causing vibration!

  • thecheef

    Posted Mar 22, 2007 5:00 pm PT

    Do you think that using cheaper chips will lead to lower performance?

  • Tremblay343

    Posted Mar 22, 2007 1:21 pm PT

    Osxgp says - "Yeah the PS3 was outsold by the Wii 3-to-1 because you can buy 3 Wii's for the price of 1 PS3. The Wii is doing excellent, but it's more overpriced than the PS3 because it's a Gamecube with motion sensor technology. What is a Gamecube selling for these days? Now who's charging too much?"

    You sir, are my idol. Compare resident evil 4 do legend of zelda TP. Tp's graphics are sltighy better. Now your all probably tihnking "But who cares, motion sensing!" Name one good game on the wii that you can;t beat in less than 10 hours on the wii, other than TP, I'm sorry, as owner of both a PS3 and a Wii (Xbox can eat my left nut), i play my PS3 waaaay more.

  • arc_salvo

    Posted Mar 22, 2007 2:50 am PT

    Cutting down chip costs is a priority for Sony, because they've been bleeing money with every PS3 they've been selling for a loss since launch. If they managed to lower prices, that would be good, but I wonder if their lack of momentum and the incredible amount of momentum that their competitors have (in contrast) may be too much of a gap to overcome.

    The PS2 sold the best in the last-gen race because it had all the games, even though it had the least powerful hardware. The X-box was much more powerful and yet it had nowhere near the market penetration or selection of games.

    Now, ironically, this situation seems to have reversed in this console race, although ironically it looks like Nintendo's Wii may be the top dog, as opposed to the other two companies.

    It's like the situation in the previous console race has flip-flopped. Nintendo is #1, Microsoft is #2, and Sony is #3...

  • osxgp

    Posted Mar 21, 2007 12:13 am PT

    Yeah the PS3 was outsold by the Wii 3-to-1 because you can buy 3 Wii's for the price of 1 PS3. The Wii is doing excellent, but it's more overpriced than the PS3 because it's a Gamecube with motion sensor technology. What is a Gamecube selling for these days? Now who's charging too much?

  • samad5

    Posted Feb 16, 2007 4:54 am PT

    Cabal23 fair point about the deep pockest that MS have. But dont forget that the Xbox hardware and lack of sales cost them a hell of a lot and only the reasonable start by the 360 has helped them break even on the console & gaming front. Sony still has the most users around the globe so I wouldn't write them off just yet.

  • ArfenZard15

    Posted Feb 15, 2007 11:29 am PT

    No Sony, no!

    I feel sorry for Sony now, its been hard, and I got a feeling it won't be worth it.

    And TVR_Fan, wtf are you on?! Microsoft and Nintendo going down before Sony?!?! I mean, at the minute that's almost literally impossible!

  • Cabal23

    Posted Feb 15, 2007 9:30 am PT

    TVR_fan are you high? Microsoft is has made Bill Gates one of the richest men on earth. The fact that 95% of homes that run PC's have Windows installed also seems to me to be another eason MS will never go bankrupt. Who is MS's competition in the OS arena..Linux? Ok let me know when 95% of the PC owners are running Linux. Sony has had problem after problem, including SONY-Ericson profits being down as well.

    "Jan. 29 (Bloomberg) -- Sony Corp., the world's largest maker of video-game players, may report third-quarter profit fell 50 percent after its flagship PlayStation 3 lost market share to Nintendo Co.'s Wii. "
    Read the full article at..
    http://www.bloomberg.com/apps/news?pid=20601101&sid=a4Jrqd8sIuJc

    So some research TVR before you start talking nonsense.

  • EFE_LOPES

    Posted Feb 15, 2007 6:23 am PT

    PS3 WILL BE IN LAST PLACE NEXT YEAR TOO!

  • soldier1993

    Posted Feb 15, 2007 5:50 am PT

    PS3 will rock in the next year

  • theKSMM

    Posted Feb 15, 2007 5:12 am PT

    Any reductions in production cost for the PS3 would be beneficial to Sony. It might help to stem their losses greatly if they can do it before the summer, when sales of the console may rise again. Another boost may be the arrival of some good, must-have games.

  • DiscGuru101

    Posted Feb 15, 2007 4:32 am PT

    -Yeah, the over the top development costs for BS3 is dragging down all of Sony now... They have to do something.

  • razu_gamer

    Posted Feb 15, 2007 3:39 am PT

    @TVR_fan.....Microsoft go bankrupt?? Your nuts. Vista...$300. End of year, 100 million homes have it.....$$$ made approx....30000000000

  • Game-o_O

    Posted Feb 15, 2007 1:28 am PT

    unreal - i would like to see you try to make a pc for $900's that compairs to the PS3, seriously; "low - end" would be right. Enjoy playing solitary.

  • TensiNothing

    Posted Feb 15, 2007 12:38 am PT

    PS3 to compete with Wii price, not happening, anyways the Wii seems alot more trust worthy at the time than Gamecube did.

    XBOX360 will have a Price cut before the PS3 drops I'd say.
    anyways, Halo3 is coming out for the 360, I don't have any clue whats coming out for the PS3. I really like the PS3 so far, I've played Resistance, its really nice and all, but I can't get the money to spend on one. even though the Wii doesn't have amazing graphics, I still like the Wii-motes,games and gameplay.
    and Guitar Hero!

  • TVR_Fan

    Posted Feb 14, 2007 11:55 pm PT

    mpeg3s Sony are not going to go bust, but I bet Microsoft will go bankrut before Sony and Nintendo will also go bankrut and close it's doors down before Sony as well.

  • mpeg3s

    Posted Feb 14, 2007 10:43 pm PT

    Poor Sony.

    They are going bust!

  • blackace

    Posted Feb 14, 2007 9:33 pm PT

    By lowering the cost of the chip, will they also lower the cost of the PS3 as well? That's the big question. I could care less what they do with the Cell chip? I care more about the consoles price and the games that's going to be played on it. Until I see these 2 thing change, I'll stick with the XBox 360 and Wii.

  • VengenceZero

    Posted Feb 14, 2007 8:11 pm PT

    well until that price goes my 360 gets all the attention

  • dadeisvenm

    Posted Feb 14, 2007 7:01 pm PT

    "P.S. Nintendo sucks for putting out such a worthless console that by no means takes advantage of its own gimmick. The Wii's games require no finesse and are designed solely to entertain the part of the gaming community that's too young to know any better. Seriously, the Wii is garbage. - Splatilian "

    here here

  • RaiKageRyu

    Posted Feb 14, 2007 6:31 pm PT

    The last paragraph was totally unnecessary and off-topic.

  • Groovay_Dude

    Posted Feb 14, 2007 5:33 pm PT

    Damn, I cant find the damn chip!

  • marioman50

    Posted Feb 14, 2007 5:30 pm PT

    I think this(the price) is part of whats been driving some people away(including me), but of course you'd never get rid of the blu-ray, would you sony?

  • unreal6666

    Posted Feb 14, 2007 4:40 pm PT

    I''ll wait to get a ps3 !!! i have a brand new pc so it takes 95% of my gaming habit..i have a 360 also...what pi$$ed me is that when i bought the ps2 i paid big time for it and it was not even when it was coming out..not even 6 months later they came out with the ps2 slim at about half the price i had paid... and you can rest assured that sony paid those gaming magazine to keep their mouth shut until the last minute so that could still push out their old expensive consoles....the ps3 is too expensive for what you get...i easily could put 300$ more and buy all the part to make a low end pc that would still kick butt graphic wise....i paid a lot for the 360 but for the ps3 wi ould pay roughly the same....not twice the price of a 360....sony may be on the verge of doing hara kiri...sega at one time was competing in the market...they put out s few expensive consoles....and look at where they are now...they used to be a big console company....the same thing could very well happen to sony....

    mom or dad do not care if the console makes games look like your right in the tv...all they care about is to buy the damn thing to shut their kids up so what do they do? they buy the cheapest console on the market....only real gamers know the capablilities of the machines and will choose what they want....

    Sony is falling to realize that people want to fill their gaming needs the cheap way and like i said that part of the market( parents,teenagers who got low revenue jobs) is huge...they gotta lower their prices to gain some ground or they will vanish into thin air and some other company will take over...shark eats shark!

  • -Murdock-

    Posted Feb 14, 2007 3:45 pm PT

    Sony, will you drop the price of the PS3 already so it can SEEM as if it might be worth getting? Way to tarnish the reputation of the PS1 and PS2.

  • chibi-acer

    Posted Feb 14, 2007 3:43 pm PT

    Gee, outsource chip production to a company that specializes in it? Brilliant.

    Lowering costs will help, but Sony really needs to get on the ball with some games.

  • Splatilian

    Posted Feb 14, 2007 3:28 pm PT

    Personally, I don't care about the fact that the PS3 can play Blu-Ray discs or that the 360 will have IP-TV. What's important to me is the games. If Sony starts putting out quality games like they've been doing for the PS2, then I'm sold.

    P.S. Nintendo sucks for putting out such a worthless console that by no means takes advantage of its own gimmick. The Wii's games require no finesse and are designed solely to entertain the part of the gaming community that's too young to know any better. Seriously, the Wii is garbage.

    Just to preempt the person who would reply to this, I am indeed a Sony fanboy; so, don't feel the need to point it out. That fact does not at all diminish how lackluster the Nintendo Wii is.

  • ROUNDHOUSE87

    Posted Feb 14, 2007 3:12 pm PT

    Oh Sony!!!! What will think of next ??? Hopefully lowering the price on PS3 so I don't have to sell my car to get one!!!!!!

  • Phazevariance

    Posted Feb 14, 2007 3:08 pm PT

    And by special, he means handicapped. The PS3 needs more work yet, and even still, why don't they upgrade the video card while they are at it.

  • gamist

    Posted Feb 14, 2007 2:38 pm PT

    I think if the PS3 drops $100, it will improve sells by a large margin. The PS3 is a nice piece to have but not $600.

  • coolcole1

    Posted Feb 14, 2007 1:34 pm PT

    anything to bring down the price it is the only thing people have against the system

  • snukadaman

    Posted Feb 14, 2007 12:33 pm PT

    this magical update should of launched with the ps3 when you bought it...not 3 months later...but thats beside the point....i only see motorstorm/virtua fighter 5 as being the games that come out in march....motorstorm being the only exclusive...i guess you got too see everything positive when its all been negative....

  • gamewhat

    Posted Feb 14, 2007 12:19 pm PT

    snukadaman gamewhat....you do know that phill would tell you anything too defend his ps3 right.....i mean..you dont belive EVERYTHING this guy is saying do you??/??the mans job sits on how many ps3's are sold....you would say it gives orgasms if you had too ----------------------------------

    snukadaman, when Phil says there is going to be one heck of an update in march that will make the ps3 special yes I do believe him . I do not beleive everything I hear from phil but it is pretty obvious what you can and can't beleive, don't ya think?

  • Chief_Kuuni

    Posted Feb 14, 2007 11:58 am PT

    they need to get their moneys worth and probably need to make it cheaper to make more money

  • psgored21

    Posted Feb 14, 2007 11:53 am PT

    gamewhat
    """
    """"dtfann003 It's funny. Wii, and 360 are on top. Sony is getting it's butt handed to them. Where are the big games??? 360 has lot's the wii has few. Come on 600 bucks for a game box is crazy. 399 is pushing it. But 399 will get you IPTV, HD-gaming, killer online fun, and good games. $600 will get you a Blu-Ray player thats about to be the new bata max, no games, crap online play, and flu if you stayed in line to buy it."""" Hey dtfann, I remember you from the xbox 360 vs. the PS3 forum. Still posting poison about the ps3 huh? getting iptv is moot. Its the same thing as saying with the ps3 you get a blu-ray player. Do some research buddy and see that hd-dvd format is getting the you know what stomped outta them. Look at the games in march and all the ps3 updates for the online and you will see the gap closing a little to fast, watch phil harrisons interview and please get your facts straight . P.S, Is this a last ditch effort by you know that sony is getting its act together to make the console cheaper. Sounds like one of the best strategies to me. If you would have said that 3 months ago I might of beleived you, but cmon man you are so wrong it's almost comical.

    ""

    fear, oblivion and motorstorm are the note worthy titles there ad even still the first two came out for the pc and 360 already. most of the games that are coming out for the ps3 in march are multiplat anyway and to be honest most of the people that i talk to that have a 360 and a three are getting the 360 version for the achievements....


    its weird that there are a lot of ps3 fans out there that keep saying that a change is going to come but what evidence have you seen to verify that? if im m$, my biggest comp right now is nintendo (the damn ds!) imo being in retail and all, i feel like the biggest demand of all systems right now is for the ds. the wii is a problem but m$ has a larger installed base *kinda like pc vs mac* getting back to my original point, there isnt much original and exclusive content coming soon to make me think that sony is going to make a major move on the wii or the 360. mgs will help and it will help a lot more when it gets a release date but still by the time the game comes out, there will more than likely be 8 million wiis out there and probably 12 million 360's and 4 million ps3s. in two years maybe the price will come down but for right now, you have a 500 or 600 dollar bottom barrel blu-ray player * i know that sounds like an oxy moron but my explaination should be enough convey my point* that doesnt (yet) play movies in 720p doesnt support vga and just so happens to play games. come on now, sony needs to make a big move that stuns the industry if they plan on "dominating" like most of you guys think that they will. you cant just tell people to wait on them because you comp isnt telling the customers to wait.

  • devilnevercry9

    Posted Feb 14, 2007 10:58 am PT

    !!!!!!!!

  • jackfatal

    Posted Feb 14, 2007 10:53 am PT

    Watchdog highlighted two cases in which consoles that had just come out of the one-year warranty period had shown the dreaded 'ring of death'--referring to the three red lights which appear on the console to indicate a fatal hardware fault!!

    this is a terrible news for x360 owners! it mean they will have to spend more money than the ps3 cost over the years and plus the xbox live it will cost around $1000! good luck MS fans!

  • red_fire4

    Posted Feb 14, 2007 9:45 am PT

    JB Hi-Fi to Stock Blu-ray Only
    Aussie retailer backs Sony's format of choice.
    An other victory to sony jejeje.

    http://ps3.ign.com/articles/764/764444p1.html

  • mazaar11

    Posted Feb 14, 2007 9:38 am PT

    the sony are going to get bumbt because the playstation 3 is going to cost a lot and they know that a lot of people might not buy it so they decided to make it cheaper and it still costs a lot. so what happens is that they use a hell lot of money to make the PS3. but they sell it at a price witch they loose money at making rather than they getting money from selling the PS3

  • furqan2006

    Posted Feb 14, 2007 9:10 am PT

    is that mean that there will be no upgrades on a chip

  • cheezlarson

    Posted Feb 14, 2007 8:59 am PT

    Well it looks like the first price cut is coming holiday season 2008.

  • shamarke

    Posted Feb 14, 2007 8:35 am PT

    i dont sony are crazy!(Playstation 3 tooo expansive) o_o

  • Daytona_178

    Posted Feb 14, 2007 8:33 am PT

    hmm, sounds interesting!!!

  • K1LLSWITCH

    Posted Feb 14, 2007 7:37 am PT

    I predict that 2008 will be the year for Sony and the Playstation 3.

  • Vihlo

    Posted Feb 14, 2007 7:23 am PT

    Meh whatever, sales will bloom in due time for the PS3, what majority of consumers are waiting for is to see if Blu-ray will come out on top. And from the looks of it, it seems to be outselling HD-DvDs. I wouldn't count the system out yet, it'll just take sometime.

    But for now, Viva la Nintendo!

  • jackfatal

    Posted Feb 14, 2007 6:31 am PT

    @NeO10102525 if u care about quality then ps3 is the quality! if its onl about online networks than wait and see what ps3 will be capable of in the 1 year time!

  • jackfatal

    Posted Feb 14, 2007 6:30 am PT

    @snukadaman u r funny!!!

  • jackfatal

    Posted Feb 14, 2007 6:23 am PT

    @Gercito u r a big liar! no one will pay 500-600 dollers for a console to just say i have it! there is a lot of reasons tp play the ps3! they still have games x360 doesnt have! and if u dont find any then y did u buy the ps3???? so bring ur lies somewhere else!

  • lightningbugx

    Posted Feb 14, 2007 6:17 am PT

    2 years is too long. Developers would have deserted the PS3 by then if it takes that long before a price drop.

    Although, I believe most of the PS3's failure in sales is not just its competitors the Wii and the X360 but also the PS2. Even though the PS3 is released, the PS2 is still having several new releases.

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