The PS3’s Cell processor.

OCT. 18, 2007 • Confirming reports in the Japanese business press, Toshiba agreed to acquire controlling interest in Sony’s Cell processor fabrication facilities, as well as another line that produces image processing chips – both of which are used in the PlayStation 3. The deals provide Sony with cash, reported to be ¥100 billion ($856 million) for the Cell business, and and additional ¥30 billion ($257 million) for the image-processing production unit. Toshiba also takes on the investment costs to make the PlayStation 3 chips more efficient and less costly to produce. The joint-partnership leaves Sony with a 40% interest in the semiconductor assets.

Impact: Cutting costs and generating liquidity can only help Sony aggressively address the PS3 price-to-value issue. It may be difficult for SCE to adjust to aggressive price reductions, given that the same was viewed with condemnation during the PS2 cycle, but reality has definitely set in. The semiconductor joint-partnership with Toshiba provides the relief needed, as well as saving Sony as much face as can be expected under the circumstances.