IBM Reaps $325M Sony Chip Investment

Sony Corp. will invest $325 million in an IBM chipmaking plant in New York as part of a deal in which IBM will help develop and make semiconductors for Sony's next-generation PlayStation. The investment, disclosed Monday, follows an IBM decision last week to combine its money-losing processor group with its unit that supplies large computer systems.

IBM says it plans to begin production of the processors for Sony during the first half of 2005 at its East Fishkill, N.Y., factory, the company's most advanced. The chips, which will be produced using 300-millimeter silicon wafers that yield more parts than current 200-millimeter ones, will power the next version of Sony's video-game system.

"Companies like Sony are turning to IBM for access to a unique combination of innovative skills and technology leadership," IBM senior VP John Kelly said in a statement. IBM's chipmaking technology group lost $252 million last year, but the company said last month it expects the group to earn money this year.

Last week, IBM merged the technology group, which employs 15,000 worldwide, with its systems group, which employs 13,000, according to a company spokesman. The new systems and technology group will be co-led by Kelly and senior VP Bill Zeitler. IBM will continue to report earnings from both businesses separately, an IBM spokesman said.

IBM is migrating technology from its PowerPC microprocessors designed for business and technical computers to PCs and consumer electronics in order to expand the market for the technology. Microsoft said in November that IBM would supply processor technology for the next version of its Xbox video game; the San Jose Mercury News reported Monday that the product, due next year, will include three IBM-designed 64-bit processors. Zeitler said recently that Microsoft's successor to Xbox will user "multiple embedded Power cores."

Apple Computer is also using 64-bit PowerPC processors in its Macintosh G5 desktop computers. Jon Rubinstein, Apple's senior VP for hardware engineering, said last month that Apple has "a long road map with IBM."

In a separate announcement Monday, Sony said the bulk of a $1.1 billion investment this year in microprocessors manufacturing would go toward production of the "Cell" chips it's developing with IBM and Toshiba.