Toshiba acquires rival Sony's chip facility for $835mn

Toshiba Corp., the Japanese electronics maker, announced on Tuesday that it has agreed to purchase Sony's high-performance semiconductor operations for $835 million, in a move to shift its resources into the semiconductor business.

Lat year in October, reports surfaced saying Sony has signed a basic agreement to sell and transfer its 300-mm wafer line fabrication facilities, which is installed in Fab 2 of Sony Semiconductor Kyushu Corp.'s Nagasaki Technology Center.

On October 18, 2007, the two parties signed memorandum of understanding for joint manufacturing venture.

On Wednesday, Toshiba Corporation, Sony Corporation and Sony Computer Entertainment Inc. (SCEI) formally signed a definitive agreement to form a new joint venture among the companies for the production of high-performance semiconductors.

The joint venture, to be named at a later date, will manufacture Cell chips and RSX graphic chips, both used in SCEI's PlayStation computer entertainment systems, as well as other microchips that go into Toshiba products.

The JV, owned 60 percent by Toshiba Corp. and 20 percent ach by Sony Corp. and SCEI, will start operation in Nagasaki Technology Center of Sony Semiconductor Kyushu Corporation (SCK) from April 1, 2008.

Manufacturing will start with 65nm process as the existing facilities are designed for 65-nanometer processing technology. But, the joint venture plans to promote the current technology to 45-nanometer process in cooperation with Toshiba's system-on-chip plant in Oita, southeast of Nagasaki.

Toshiba’s latest move comes merely a day after it announced its decision to abandon the HD DVD format, handing a victory to rival Sony Corp. and Matsushita Electric Industrial Co.'s competing Blu-ray, in the high-definition DVD format war.

Toshiba said it decided to stop promoting its HD DVD format for the next-generation DVD after a thorough review of its overall strategy. It decided to abandon production of HD DVD recorders and players and other related accessories after losing the support of major studios and retailers to the Blu-ray technology backed by Sony, the company has said in a statement.

The Tokyo-based electronics conglomerate has done everything to woo the retailers and customers to buy their product. Toshiba had even launched an aggressive advertising campaign to promote its HD DVD players and had slashed prices of entry level players by about 50%.

But all this did not yield the expected results. The competitor Sony has taken a considerable lead in the format rivalry in recent months, gaining the exclusive endorsements of The Walt Disney Co., Sony Corp.'s Sony Pictures, News Corp.'s Twentieth Century Fox, Metro-Goldwyn-Mayer and Time Warner Inc.'s Warner Bros. Entertainment.

Toshiba’s decision to abandon the HD DVD format ends its war with the rival Blu-ray with whom it has been indulged in battle for the $24-billion-a-year home video market share since the formats’ launch in Year 2006.

Toshiba said it would cease research and production of HD DVD equipment and will end the business around March 31. However, Toshiba will continue to provide full product support and after-sales service for 1 million owners of its HD DVD equipment including players and recorders.