Sony, Qimonda in Chip Joint Venture

In an effort to cut costs, Sony Corp. announced Tuesday it will form an equally owned joint venture with semiconductor company Qimonda AG, a unit of Germany's Infineon, to manufacture DRAM (dynamic random access memory) chips for use in its mobile phones, digital cameras and other consumer electronics. Financial terms weren't disclosed. Sony is in the process of reorganizing its semiconductor business, which lost 10B yen last year. Earlier this year, Sony had said it would scale back its investments in chips. Operations at the new company, to be named Qreatic Design and located in Tokyo, were expected to start by year end. The venture will combine Sony's design capabilities with the manufacturing capabilities of Qimonda. In addition to cost savings, analysts said it was good for Sony to be expanding its number of chip suppliers. Sony shares rallied 4.3% to a two-month high in Tokyo on the news while shares of Elpida Memory, a Sony supplier, stumbled 3.7%. "Either Samsung or us will be affected, but not significantly," Takehiro Fukuda, chief administrative officer at Elpida, told Bloomberg. Prices in the highly competitive DRAM market have dropped sharply in recent months as manufacturers increased their output.

Sources: Bloomberg, MarketWatch, Reuters
Commentary: DRAM Memory Vendors Headed For Trouble • Sony's Problems Can't Be Solved Without New Blood
Stocks/ETFs to watch: SNE, QI. Competitors: PHG, MU. ETFs: SMH, IGW, PSI
Earnings call transcript: Sony F1Q07

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