Amount will be cut in a new three-year plan

TOKYO — Sony will sharply cut coin spent on semiconductor chips, Sony executive deputy president Yutaka Nakagawa told reporters Tuesday.

From 2004 to 2006, Sony invested ¥460 billion ($3.8 billion) in its chip business. That amount will be slashed in the new three-year plan, starting in fiscal 2007, to around $2.48 billion.

One aim is to boost the profitability of the semiconductor division and the company as a whole. Another is to lower the prices of Sony products, particularly the PlayStation 3, which has been outsold three to one in the Japanese market by the far cheaper Nintendo Wii console since both launched in November.

Instead of developing and manufacturing chips for next-generation games and other Sony hardware inhouse, the company intends to source more of its chip needs from subcontractors in Taiwan.

Sony’s chip business is currently focused on CMOS sensors for the lenses of digital cameras; cell chips for game consoles, including the PS3; and chips for LCD TVs and other digital consumer products. Company plans to begin switching to next-generation 45-nanometer chips by 2009.

Semiconductor division sales are projected to total $6.36 billion for the fiscal year ending in March, accounting for 9.4% of Sony revenue. While sales are up 57% from the previous year, the relatively high cost of inhouse chips has helped make the PS3 significantly pricier than its Nintendo and Microsoft rivals. That’s contributed to slower-than-expected sales — and a $54.2 million loss for Sony’s game division in the third quarter of fiscal 2006.

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