Sony's chip division looks inward for growth

After struggling for years to define its role as a chip supplier, Sony Corp.'s semiconductor business is now emphasizing internal customers in an effort to differentiate its parent company's consumer electronics products, according to a high-level Sony executive.

External customers have become a secondary focus, and the development of general-purpose standard ICs is no longer a priority.

That shift in focus is hardly surprising, since Sony hasn't succeeded as an independent silicon vendor in the commercial IC market, although the company has flirted with the notion on and off during the last decade. Now that a host of new players is entering the consumer electronics market, including suppliers from China and Taiwan along with traditional PC companies like Dell Computer, Sony sees its own semiconductor business as a linchpin for its survival.

Sony's future as a leader in the consumer electronics industry rests upon "our own key device technologies, including semiconductors," Katsuaki Tsurushima, senior executive vice president and electronics chief technology officer at Sony, said in an interview with EE Times during the ITU Telecom World 2003 conference here. From mobile handsets to digital TVs, "everything is based on a standard platform these days," Tsurushima said. Dominance will be determined not by a platform, he said, but by "applications that run on top of a platform and hardware devices underlying the platform."

Tsurushima, a former leader of Sony's device business, acknowledged "an eternal debate" within the company over "how to strike a right balance on businesses focused on internal and external customers." While some have argued that Sony will never become a competitive semiconductor supplier without vying on the open market, the company - at least for now - has settled the debate by concluding that a pressing need to strengthen its core consumer products could be met by leveraging its unique devices.

To be sure, Sony will continue to supply some of its key semiconductor products to competitors in order to achieve economies of scale. But the company will be more selective in its product offerings and also in their timing, a company spokesman said.

The Japanese consumer electronics giant announced earlier this year that it will invest a total of $4 billion over the next three years in semiconductor-manufacturing facilities, and another $4 billion in R&D for key devices, including semiconductors, displays and batteries. The total includes investment plan for 65nm process technology on 300mm wafers, which Sony considers critical to the Cell processor it is designing jointly with IBM Corp. and Toshiba Corp.

The Cell microprocessor, expected to be the main product at a new 300mm wafer fab to be constructed by Sony, is targeted to provide teraflops performance and consume relatively little power. The processor will be used in future versions of the company's Playstation game console, as well as in various broadband network nodes, according to Sony.

Asked to comment on Sony's device strategy for mobile handsets, Tsurushima said: "Our product differentiation and profitability are derived from our own, key peripheral devices." He listed a range of products - from megapixel charge-coupled devices, organic-EL displays and lithium-ion batteries, to single-chip CMOS GPS chips and a low-power, mobile terrestrial digital TV receiver tuner - as being crucial to Sony's gaining an upper hand in an increasingly competitive mobile market. "Developing low-power-consumption devices has been a part of Sony's culture since our invention of the Walkman," Tsurushima said.

Sony's internally developed chips for mobile handsets are mostly hardwired solutions, designed to add peripheral multimedia functions to the phones. The company is not in the business of either baseband or multimedia processors, both of which sit at the heart of mobile handsets. It remains unclear how Sony will apply its internal chip development efforts to the mobile-handset business.

Asked specifically about the semiconductor unit's role in the future baseband or application processor markets, Tsurushima said, "We haven't decided," then quickly added, "Besides, what Sony Ericsson may do in the future is up to them."

Pointing to a number of mobile CPUs and DSPs that now dominate the handset market, Tsurushima said, "They are becoming increasingly commoditized. It's just like a PC. Whether you buy a CPU from Intel or AMD, it won't make that much difference anymore."

- Junko Yoshida

EE Times