After HD DVD Drop, Toshiba Spends $835M to Back PS3
February 23, 2008 12:46 PM
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The 90nm Cell/B.E. package as found in the PlayStation 3, now to be manufactured by Toshiba.
Sony gives Toshiba something in return for its troubles -- Japanese Cell chip plants for $835M
A new twist has emerged with the death of HD DVD. After Warner, Best Buy, Walmart and Netflix jumped on the Blu bandwagon
, the fate of HD DVD was already sealed.
Despite the grim news, the principal HD DVD developer, Toshiba Corporation,
refused to initially comment on its plans for its HD DVD
. However, as many analysts predicted, Toshiba came out last week and
officially surrendered to Blu-ray
Many saw Toshiba's willingness to give up on HD DVD as a logical business decision and perhaps an admission of Blu-ray's superiority. However, there might be a little more to the story.
reports that on Wednesday Toshiba and Sony Corporation, one of Blu-ray's principal developers,
agreed to a major business deal
, reached just after Toshiba made its final HD DVD decision.
Sony agreed to sell it microchip processing facilities in western Japan for approximately $835M USD. These facilities currently produce Cell processors and RSX graphic chips. Toshiba will enter the joint venture with Sony on April 1, 2008.
Toshiba, IBM and Sony were the principal developers of the Cell microprocessor, but Toshiba previously showed little interest in using the chip for any of its own projects. Sony touts the Cell broadband engine in its Playstation 3 consoles; IBM uses the Cell processor in high performance computing clusters. Toshiba has vowed to now use the Cell in its upcoming products.
While Toshiba and Sony
entered into talks back in October 2007
and reached a tentative agreement to sell the cell facilities, the two companies continued to haggle about the price. Sony's concession of what is considered a favorable price for Toshiba will likely strike many following Toshiba's drop as HD DVD as more than a coincidence, and perhaps a sign of an informal agreement.
The other interesting aspect of the move is that it indicates a clear shift by Toshiba to back the PS3. The PS3, which last month
outsold Microsoft's Xbox 360
, previously had few ties to the company; while Microsoft's number one ally in hardware manufacturing has always been Toshiba. Toshiba manufacturers several components for the Xbox 360, including the HD DVD add-on, and the Microsoft Zune MP3 players.
Toshiba's flip-flop may have been in the cards for a while.
Microsoft showed little remose
as HD DVD took second place to Blu-ray; a move Toshiba must have recognized from its American ally. Now the solidified PS3 venture between Sony and Toshiba indicates that Toshiba now has switched to backing the PS3 almost exclusively,
another victory for Sony
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What did they buy?
2/23/2008 5:22:19 PM
You make two contradictory statements, ironically in the same paragraph.
"Sony agreed to sell it microchip processing facilities in western Japan for approximately $835M USD. ... Toshiba will enter the joint venture with Sony on April 1, 2008. "
So, what is it?
A) Sony sold the plant to Toshiba for $835M. Toshiba produces the chips and sells them to Sony. It's a joint venture in that Toshiba gets paid to make the chips, and Sony gets paid to make the PS3. Toshiba makes no money from sales of PS3s, only construction of PS3s.
B) Sony sold half the plant's ownership to Toshiba for $835M. They share the revenue attributed to manufacture of these chips for use in the PS3.
With the profit made from producing Cell processors, and the amount of PS3s sold, won't it take a *very* long time for Toshiba to make back that money?
RE: What did they buy?
2/23/2008 5:55:31 PM
As it was worded in the press release, Sony sold Toshiba the physical plant, but it's part of a separate joint venture outside the Toshiba-IBM-Sony joint venture that already exists.
So these two statements are not contradictory, but the way businesses deal with each other never seem totally straightforward.
RE: What did they buy?
2/24/2008 8:17:45 PM
$835 Mil is very cheap for a 65nm plant now a days, it is almost like a giveaway (Sandisk/Toshiba's NAND FAB cost a few times over that).
Plus you don't know how much Toshiba is charging Sony for the cell afterward.
"We don't know how to make a $500 computer that's not a piece of junk." -- Apple CEO Steve Jobs
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