Another article on the PS2 CPU and graphic chip increase.
Sony to spend Y125 bln to lift console chip output
TOKYO, June 1 (Reuters) - Japanese electronics giant Sony Corp said on Thursday it would spend 125 billion yen ($1.16 billion) to boost output of chips used in its cutting-edge PlayStation2 console to smoothe its overseas debut in October.
Sony's wholly-owned game-making Sony Computer Entertainment Inc (SCE) unit will make the additional investment to its initial 130 billion yen outlay in two semiconductor plants in southern Japan, one for graphic chips and the other for advanced central processing units (CPUs), or ``core'' chips.
The fresh spending is aimed at boosting output of its popular 128-bit PlayStation2 game player, which SCE launched on March 4 in Japan, shipping more than one million in the first week and two million machines in the first 82 days.
SCE's decision would mean accelerating its plan to sell those chips to other manufacturers of consumer electronics.
``This is a strategic decision involving our business future,'' SCE President Ken Kutaragi told a news conference, adding that the investment would enable Sony chips to be used in digital televisions and other electronics products.
The CPU, called ``emotion engine,'' was jointly developed by SCE and Toshiba Corp, one of the world's largest makers of notebook computers, and is currently produced by Toshiba.
Toshiba sells 10,000 silicon wafers a month to SCE for use in PlayStation2.
Under the new capex plan, SCE will spend 23 billion yen to add production lines at its graphic chip plant, 67.5 billion yen on building a graphic chip plant and 34.5 billion yen to reinforce output capacity at its LSI plant.
Kutaragi said SCE plans to increase PlayStation2 output to 1.4 million per month by the autumn from 500,000 now and to 2.2 million once the new plant comes on line next April.
Sony last month said it would release one million PlayStation2 machines in North America and Europe on October 26 that it expects to be snapped up in pre-orders or on launch day. Two million more will follow for the first quarter of 2001.
CHIPS DOWN FOR BUSINESS EXPANSION
The funds will be raised through a loan from SCE's parent, which plans to raise money through debt financing.
``PlayStation is expected to become something more significant than just game consoles or computers,'' Sony president Nobuyuki Idei told a news conference. ``The Sony group as a whole will back up PlayStation as a future network information device.''
Its built-in DVD-ROM player allows users to watch movies and listen to music and will eventually let them access other entertainment services through a broadband network.
Analysts see the move as an aggressive step for Sony whose profits sagged 32 percent in the last business year, sapped by a strong yen and the cost of launching PlayStation2.
``The new investment is quite large,'' said Takatoshi Yamamoto, managing director at Morgan Stanley Dean Witter. ``It illustrates either Sony's extremely bullish outlook for PlayStation2 demand for next year or a strong commitment to its chip business.''
The news failed to inspire investors. Sony shares closed unchanged at 9,750 yen, while Toshiba rose 0.58 percent to 1,046.
((Tokyo Equities Desk +81-3 5473 3714
tokyo.newsroom+reuters.com))
($1-107.78 Yen) REUTERS Reut06:38 06-01-00
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