Toshiba to Sell Chipmaking Facility to Sony, Outsource Output to Samsung

Toshiba Corp., Japan’s biggest chipmaker, plans to sell a semiconductor factory to Sony Corp. and outsource some output to bigger rival Samsung Electronics Co. as it tries to improve profitability at the chip business.

Sony will buy Toshiba’s plant in Nagasaki, western Japan, which makes the Cell graphics chips used in PlayStation 3 video game consoles, the two companies said in a joint statement today, without disclosing financial details. Toshiba is also in talks to shift more production of its non-memory products to other chip manufacturers, including Samsung, said Hiroki Yamazaki, a spokesman for the Tokyo-based company.

Toshiba shares rose to the highest level in three weeks in Tokyo today. The company, which will shut a plant this month to phase out low-end chips, can cut costs and improve efficiency by selling the factory and teaming up with other manufacturers, said Takeo Miyamoto, a Tokyo-based analyst at Deutsche Bank AG.

“It’s about cutting expenses,” he said in a phone interview. “The factory they’re selling back to Sony, it wasn’t profitable or efficient for them.”

Shares Gain

Toshiba’s shares rose 0.7 percent to 441 yen at the 3 p.m. close of trading, the highest level since Dec. 6.

The company will continue to produce some system LSI chips, whose functions range from processing images for television screens to crunching data, it said.

Samsung, Asia’s biggest maker of chips, will manufacture wafers for Toshiba using its 40-nanometer technology, the Suwon, South Korea-based company said in a statement today. Sales of products that Samsung manufactures for other companies may account for about 15 percent to 20 percent of its current system LSI semiconductor sales, Seo Won Seok, a Seoul-based analyst at NH Investment & Securities Co., said.

In June, Samsung said it will invest $3.6 billion to expand capacity at its 12-inch chip plant in Austin, Texas. The new facilities, which will be in full operation by late 2011, will be used to make LSI chips, Bill Cryer, a Samsung spokesman, said on June 9.

Breaking Even

Toshiba’s chip division broke even in 2009 after incurring a 280 billion yen ($3.4 billion) operating loss in the previous year. System LSI chips will account for 30 percent of the 1.2 trillion yen in sales Toshiba forecasts from its chip business this year, according to the company.

Toshiba also said today it will consolidate production of analog and imaging chips at its plant in Oita, on the southwestern island of Kyushu, and in Iwata, northern Japan.

Sony will buy back the Nagasaki facility for about 50 billion yen to double its monthly production capacity of the sensors, used in digital cameras and smartphones, to about 40,000 units, the Nikkei newspaper reported yesterday. Sony sold the plant in Nagasaki prefecture to Toshiba in 2008.

To contact the reporters on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net; Jun Yang in Seoul at jyang180@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

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