Sony to leave three-way microchip development pact

TOKYO (Reuters) - Sony Corp (6758.T) said on Saturday it has no plan to pursue further development of advanced microchips in a three-way pact with NEC Electronics and Toshiba, in a potential blow to the Japanese chip sector's bid to join hands to better compete with overseas rivals.

Sony, Toshiba Corp (6502.T) and NEC Electronics Corp (6723.T) said in February 2006 they would co-develop technologies to make system chips with circuitry width of 45 nanometers, sharing hefty costs and pooling technological expertise.

They announced in December they had developed technologies for volume production of the advanced chips, and the contract between the three expired in March.

But Toshiba and NEC Electronics, the semiconductor unit of NEC Corp. (6701.T), plan to sign a new contract to develop energy-saving and other technologies to improve the next-generation chips, Kyodo news agency said on Saturday.

Since any development efforts in the next stage would have more to do with actual production than the initial phase and Sony is considering contracting out production of 45-nanometer chips, it will not renew its contract with Toshiba and NEC Electronics, a Sony spokesman said.

Sony Executive Deputy President Yutaka Nakagawa said in February the company would cut back on future chip spending and may not produce advanced chips in-house, in a move aimed at driving the semiconductor unit's nascent earnings recovery.

Officials at Toshiba and NEC Electronics were not immediately available for comment.

A nanometer is one billionth of a meter, and system chips combine logic, memory and other functions on a single piece of silicon.

Finer circuitry decreases the size of a chip and enables data to be processed faster. It also cuts production costs per chip.

But costs for development and production facilities have increased as technology moves to ever-more intricate circuitry, making it difficult for chip makers, except for a few giants with deep pockets such as Intel Corp. (INTC.O), to go it alone.