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Tokyo:

Japanese company Toshiba announced that it had agreed to purchase high-performance semiconductor operations from its rival Sony for 835 million dollars, just a day after losing to its competitor in a tough DVD format war.

The new Playstation 3 control and box are displayed at a Sony Computer Entertainment America news conference in San Francisco, California, October 19, 2006. Sony Corp said on Wednesday it will sell its microchip production facilities in western Japan to Toshiba Corp for 90 billion yen ($835 million), in their latest move to focus on their core businesses. REUTERS/Kimberly White

In spite of being tough competitors both the companies announced that they had made up a deal to form semiconductor joint ventures were 60% is owned by Toshiba Corp. and 40% is owned by Sony Corp.

Toshiba will pay 90 billion yen to Sony for its operations in western region of Nagasaki to make high technology semiconductors, including its talent behind PlayStation 3 video game console, a joint statement said.

These chip lines will be then loaned by Toshiba to the joint venture, which will start functioning in April.

Sony first announced in October that it would sell its chip facilities to Toshiba as part of efforts to modernize its operations. It would sell it manufacturing amenities to Toshiba for making the key component microchips that have been used in the production of Play Station 3. But the price at which Sony is selling to Toshiba is not available.

Sony is looking to discard non-core assets and restore its mainstay in electronics business along with the brisk sales of flat and LCD televisions and digital cameras.

The sale of the chip lines to Toshiba will help the Sony to reduce its cost of production for Play Station3 as it struggles to earn back its huge investment where it is facing tough competition from Nintendo’s Wii.

Meanwhile Toshiba will be concentrating on other growth areas such as production of semiconductors and memory chips that are used in small handy music players.

The announcement regarding the sale of chip lines came, just a day after Toshiba had lost to its rival Sony in a tough DVD format war. Toshiba announced that it would stop the production and sale of its HD DVD technology by this month, providing the way for Sony’s Blu-ray format to rule the next-generation market.

Based on the deal Toshiba will be taking over two manufacturing units—one in Nagasaki and the other in Oita—which, paradoxically, make the Cell processor and RDX graphics controller which is being used in Sony’s Blu-ray equipped PlayStation 3 game console. The plants also produce various chips that have been used in a variety of Toshiba products.

Sony is now concentrating on the production of image sensor chips which is an imperative component for digital cameras and keeping away from heavy investments for advanced chip production machines.

This Joint Venture will help the Sony to cut down its production cost especially in the manufacturing of Play Station 3 game console where as Toshiba will be focusing mainly on the production of semi-conductors and memory chips that are used as a component in small handy cameras.

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