Sony to cut semiconductor capital expenditure; 45nm Cell in FY08/09

[Todd33]

Time to de-escalate the situation; don't let things in this thread become personal.

 

[NERO]

I don't see why it is surprising that Sony is cutting expenditures on semiconductor operations. They have already invested the heavy capital for their long term usage (the ip, the fabs, outsourcing (which is on-going). I could be misinterpreting the statement but IMO it shows that Sony is where it wanted to be in this particular division.

P.S. Have there been any updates on the non-PS3 usage of sub-7 spe cells. The full cells are going to IBM, but I haven't heard anything about any of the other combinations in ages.

 

[Capeta]

P.S. Have there been any updates on the non-PS3 usage of sub-7 spe cells. The full cells are going to IBM, but I haven't heard anything about any of the other combinations in ages.

They've been stored away...to be used in future unannounced products...Phantom II maybe?

 

[Panajev2001a]

This is inline with Stringers intentions of turning Sony into more of a design and software company.

Which would be basically killing what Sony stands for:

[...] as Sony stated in its Founding Prospectus: "The first and primary motive for setting up the company was to create a stable work environment where engineers who had a deep and profound appreciation for technology could realize their societal mission and work to their heart's content."

http://www.sony.net/SonyInfo/Environment/management/message/stringer/index.html

How does the electronics company fit into the big picture?
Stringer: The whole company, it's Sony United these days -- I don't want to think of Sony United as separate P&Ls (profit and loss statements) that ignore each other. That was part of the problem over the last three or four years. We are a shared environment today.

In the digital world one of the difficulties has been that one company can lose money so that another part of the company can make a lot of money. That's something that we've had to educate people about. That's the difference in the digital world. In the analog world, self-contained P&Ls made sense. In a horizontal digital world, they don't.

For example, we have $4,000 projectors for movie theaters. Those are short-term expenses, but it saves $160 million for the movie company across studios. So, how do you make a decision on whether to go forward with the $4,000 projector with all the cost implications of a more sophisticated product? If you make it in the narrow analog decision P&L, you probably make a decision not to do it. But when you're going to save $150 million in another part of the company? You have to get the company used to the idea that the left hand can make the right hand money and vice versa, and that's part of the cultural change that Sony United represents.

http://www.zdnet.com.au/insight/hardware/soa/Sony_s_brave_Sir_Howard/0,139023759,339273163-2,00.htm

I do not think Stringer will kill Sony like you are saying... at least if he does not want key SCE people forming a new alliance (with some Toshiba guys too maybe) with SAMSUNG and MS for their next console .

 

[patsu]

I used to hear a lot of, "Sony fabs it's own stuff so they really have a big edge on the bottom line on the backend, (even though they invest billions upfront)". Guess it's not so anymore...

You used to hear it and it´s still the case to some degree with the PS3 but as mentioned above, they don´t make everything themselves. What the Sony dude says is "if we can buy the production facility cheaper than we can buildt it ourselve we will do that". Obvisouly they didn´t think this was the case before which was why Sony had "the edge on the bottom line on the backend".

I agree. Sony would have made its own analysis on what's worthwhile to do in-house and what to outsource based on market dynamics. Cost, strategic control, and business directions are all key inputs.

e.g., Sony decided to stay out of making its own pluggable HDD and let gamers choose from the market themselves. This is cheaper for the consumers (not necessarily so for Sony... since it could sell them at a premium).

However they went ahead to make Cell and Blu-ray parts (although the initial batch of Cell is produced by IBM, I think).

If they do this right, Sony is always in a position to decide what's best for them.

 

[Panajev2001a]

They are behind schedule... but no more so than IBM themselves in a manner. So what does that ultimately mean? The entire industry has had a sort of speedbump on the 65nm node - Intel is simply in a different league when it comes to process advancement, but they always have been. Blu-ray diodes are indeed another place where Sony was 'behind schedule,' but today they are the volume leader in production and utilization. Just because you're behind on your own schedule, doesn't mean you're not ahead of the other guys schedule... and *that's* what's important.

Anyway, it would be interesting to see what a Kutaragi-run company would have resembled. I don't think an in-house fabrication capacity is a negative in any way save for cash-flow and capital expenditure reasons. The economics *do* favor it so long as the capacity demand is there; thus I wouldn't be surprised if Sony eventually were to build out a 45nm line anyway, but we'll see.

XBD, it might also mean that their next fabs will be developed with other partners too while ALSO using UMC and TSCM... I do not see Sony not making any more manufacturing process development after the 65 nm node, especially when they strengthened the pact with IBM and Toshiba on sub-32 nm technology not many years ago (after Kutaragi had already been "ousted" so to speak)... it would feel wrong to me .

 

[Carl B]

XBD, it might also mean that their next fabs will be developed with other partners too while ALSO using UMC and TSCM... I do not see Sony not making any more manufacturing process development after the 65 nm node, especially when they strengthened the pact with IBM and Toshiba on sub-32 nm technology not many years ago (after Kutaragi had already been "ousted" so to speak)... it would feel wrong to me .

Well... first of all I agree with you in principal. In specifics, I think that there's still associated research in terms of Cell on the smaller nodes in which Sony would wish to participate, even if the process technology itself was not to be used directly by them. Architectural specifics mainly.

But I agree, in one form or another I see Sony fab-ownership as going forward, even if only on a limited basis. Their past joint-venture agreements in terms of Toshiba and OTSS, and IBM and East Fishkill, indicate a means via which Sony might pursue fab capacity in the future, while still keepign a finger on the "process pulse" should they ever want to go full bore again. And of course, even at 45nm they haven't ruled out their own fab - the article is explicit in making that point.

 

[Crossbar]

Which would be basically killing what Sony stands for:

http://www.sony.net/SonyInfo/Environment/management/message/stringer/index.html

http://www.zdnet.com.au/insight/hardware/soa/Sony_s_brave_Sir_Howard/0,139023759,339273163-2,00.htm

I do not think Stringer will kill Sony like you are saying... at least if he does not want key SCE people forming a new alliance (with some Toshiba guys too maybe) with SAMSUNG and MS for their next console .

With all due respect, I did not say he would kill Sony, I just said he is turning Sony into more of a design and software company.

Sony’s Stringer Talks Software at D4; Burke Promises Lots of Cable Content

He did talk about how Sony has “been an analog company migrating to digital.â€￾ He agreed with comments that its software hasn’t been as good as its hardware. He said the company historically did great embedded software, but not good applications, and talked about how that was true for its music players. But he said they were putting in place a new system to develop software. Now it is a “hardware company migrating to a software company.â€￾

Stringer on Sony's difficult migration to digital tech

"It's part of the new digital strategy to try and create a new software mentality in Tokyo, because it's quite clear that we've been an analog company migrating to digital with some difficulty," concluded the Welsh-born executive.

I recommend you to google "Stringer Software Sony" and you´ll end up with articles like:
Sony software czar's big challenge
Sony's software future
....
...

The fact he head-hunted Tim Schaaff from Apple to coordinate Sony software development tells plenty IMO.

Do you really think it will kill Sony?

 

[Rangers]

Well, here are a couple of interesting links from Inq (yeah, standard disclaimer).

This one basically says 65nm is still struggling. I tend to believe that. MS (chartered) delayed it and we hear things like that Cell is on 90nm and 65nm. To my mind they probably cant fully switch over the 65nm because the production is not there. Obviously I think each next fab step is going to get more arduous. It seems like we've been going to 65nm forever, yet we're still not easily there. This sort of, gives pause to all this talk we do about 65nm and easy price cuts being constantly righ around the corner imo.

http://www.theinquirer.net/default.aspx?article=37604

This one says:

The report said it has decided to can big investments developing future versions of its co-developed Cell microprocessor, and even outsource production of the 45 nanometre chip.

That is right in line with my last post...basically saying they are not putting so much into Cell R&D of future versions. The thing is being the INQ, I dont know if it's true, and Nikkei requires a subscription for the Inq link, so I cant read the article to further clarify.

http://www.theinquirer.net/default.aspx?article=37600

 

[Carl B]

Forget about that Inq article - the original story is translated via the Marketwatch article linked to in the OP, complete with Sony executive statements. The Inq article highlights Cell R&D specifically, whereas all other sources indicate cap-ex in general, framed in terms of fab capacity; those are two different things, and until further clarification (if forthcoming) should be viewed as an in-house inference by the Inq. Perhaps 'One' will chime in with a more complete take on the article.

 

[Capeta]

If SONY decides to outsource CELL manufacturing, that would mean their own fabs dedicated to CELL will be idle..not a good thing. I don't think their main fabs will be producing EE+GS or PSP chips since those two are not production limited. In fact the EE+GS manufacturing looks to be the first to get downscaled since PS3 will be going emulation in a couple years not to mention slowing sales of PSTwo. Sales of PSP has pretty much stayed the same so there's no need to produce more using the idle fabs.

 

[SedentaryJourney]

Well it would be rather pointless for Sony to pay someone else to do something they could do themselves...

 

[dodo3]

So Sony is leaving the hardware business and entering software?

 

[inefficient]

So Sony is leaving the hardware business and entering software?

Ah, the climax to this fun little "telephone game" we had going on here.

 

[dodo3]

Ah, the climax to this fun little "telephone game" we had going on here.

Maybe that was the wrong question to ask.

I'm just a little confused to what Sony is aiming for here?

 

[-tkf-]

Maybe that was the wrong question to ask.

I'm just a little confused to what Sony is aiming for here?

To save money. If they can outsource the 45nm production of the Cell chip and save money they will do that, if not they will do it themselves.

I think the "software" company statement is somewhat unrelated to this. In the past the Console was only hardware (and tools of course). Today it´s much more, it´s a movie player, web browser, online store etc etc in other words lots of Software.

 

[inefficient]

Maybe that was the wrong question to ask.

I'm just a little confused to what Sony is aiming for here?

It would be like saying Nvidia is not a hardware company because they do not actually fab their own chips. They outsource the fabrication to a company that specializes in that like TSMC UMC.

For PS3's 90nm Cell processors Sony was not even fabbing them anyway - IBM was. It's just that they spent a whole lot of money building/buying a 65nm fabrication plant and they may not even see much profit out of it if any before they have to move to 45nm.

So they are not getting out of hardware. If anything there hardware business is stronger than ever right now. They will just try to cut back on manufacturing costs compared to recent past years where they spent a LOT of money in this category.

 

[dodo3]

It would be like saying Nvidia is not a hardware company because they do not actually fab their own chips. They outsource the fabrication to a company that specializes in that like TSMC UMC.

For PS3's 90nm Cell processors Sony was not even fabbing them anyway - IBM was. It's just that they spent a whole lot of money building/buying a 65nm fabrication plant and they may not even see much profit out of it if any before they have to move to 45nm.

So they are not getting out of hardware. If anything there hardware business is stronger than ever right now. They will just try to cut back on manufacturing costs compared to recent past years where they spent a LOT of money in this category.

Ah okay, I see.

So what is to become of Sony's (Nagasaki?) 65nm fab? Can't they use it for their other products besides Cell? If they skip 65nm and go to 45nm, they can or cannot use this fab?

 

[Capeta]

Ah okay, I see.

So what is to become of Sony's (Nagasaki?) 65nm fab? Can't they use it for their other products besides Cell? If they skip 65nm and go to 45nm, they can or cannot use this fab?

Technically they *could* use it for other things but other things are already being fabbed on older fabbing equipment using cheaper smaller wafers elsewhere so you'd just be shifting manufacturing from one fab to another. You will still have idle fabs. Not only that but if you switch from say manufacturing chips on existing 130nm process then move it to 65nm, you are going to have to redesign all the PCBs which affects a lot of the manufacturing down the chain that use those chips which will cost a lot of money. It's simply not worth it if you don't need tens of millions of chips. SONY doesn't fab chips for other companies either so no income there.

If they skip 65nm and goto 45nm they can still use the fab if they buy new 45nm equipment. That's not the point though. The point is if it's cheaper to have someone else do it, there's no economic incentive to do it at your own fabs which will need expensive upgrading. Fab companies constantly upgrade because fabbing is their business ie they get paid to fab. They use some of this income to upgrade build new plants. Since PS3 is losing money for SONY and since it seems dedicated fabs may be cheaper it may not make any sense to upgrade their own fabs.

 

[Crossbar]

So they are not getting out of hardware. If anything there hardware business is stronger than ever right now. They will just try to cut back on manufacturing costs compared to recent past years where they spent a LOT of money in this category.

Absolutely, they are not leaving the hardware business, but Stringer is signalling a slight shift of focus to the software side of business, which makes perfect sense IMO since the sw will often be the biggest differentiator in a lot of products in the future.

Edit: Look at the iPhone, many companies could come up with that hardware, but few companies could come up with the sw demonstrated by Jobs. It's the interaction and communication capabilities that makes the iPhone compelling.

If this has anything to do with the possibility of outsourcing the 45 nm manufactoring of Cell or whatever, we just don´t know, but Stringer may very well be waging the investment of a 45 nm manufactoring plant against a similar investment in software, what would give the best return of investment and what would provide least risk.