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Sony plans to sell semiconductor facilities

Sony is in talks with Toshiba to sell its advanced semiconductor production facilities as a part of its strategy to slim down its non-core assets.

The move would see Toshiba become a major supplier to Sony of image processing LSI (large-scale integrated) - used in video cameras and games consoles - as well as the Cell processor, a joint development by IBM, Sony and Toshiba. Cell processor is used in Sony's PlayStation 3, and other products.

While the move allows both companies to focus on their core business, the discussions also highlight the difficulty in which the Japanese company has had competing in the global market with semiconductors against companies like Samsung and Intel, especially in the LSI market.

Unexpectedly slow sales of the PlayStation 3 console, as well as a lack of other large-scale commercial applications for the Cell processor, has resulted in production costs remaining high. Japanese semiconductor manufacturers are struggling to compete with the likes of Samsung and Intel, while Toshiba will be faced with the need to improve profitability should the sale take place. By becoming a major supplier to Sony, Toshiba will effectively increase their market share.

The sale is expected to cost Toshiba 100 billion yen ($AU1.05 billion), with Toshiba having full ownership of the equipment, and a joint venture between the two companies will be drawn up to handle the production lines.