Sony to double output of PlayStation 2 video game console

Manufacturing delays crimped shipments of hot Christmas item

January 16, 2001|By BLOOMBERG NEWS

TOKYO - Sony Corp. said yesterday that it will double production of its PlayStation 2 in the next three months because parts shortages left many consumers empty-handed after introduction of the video game console in Europe and the United States.

The world's largest game console maker aims to make up for delays caused by lower-than-expected production capacity for the PlayStation 2's advanced graphics chip. The machine was the must-have item for Christmas, though manufacturing delays forced Sony to scale back shipment targets in the United States by as much as half.

Sony is stepping up the manufacturing of PlayStation 2s before other companies release competing machines. Nintendo Corp.'s Gamecube machine is due later this year, and Microsoft Corp. plans to start selling its Xbox console during the first quarter of 2002 in Europe and by the end of this year in the United States and Japan.

"Sony knows it'd better accelerate the production because the honeymoon will end fairly soon," Frederic Diot, an analyst at Datamonitor PLC, said. "It's a race to reach maximum production."

The company has said it wants to ship 10 million consoles worldwide in the year ending March 31, including 3 million in both Europe and in the United States. That goal will probably be met, Sony Computer Entertainment Vice Chairman Shigeo Maruyama said.

The PlayStation 2, designed as a device for downloading music, movies and games from the Internet, is central to Sony's home-entertainment strategy. The popularity of the console is key to encouraging software makers to develop more games and dominating the machine business. Since April 1, Sony has shipped 5 million of the devices.

Shares of Tokyo-based Sony rose 180 yen, or 2 percent, to 8,980 yen yesterday. Sony was the most actively traded stock on Japanese exchanges.

The PlayStation 2 is the successor to Sony's best-selling game system, which in 1999 contributed 40 percent of the company's operating profit.

The shortage of graphic synthesizer chips that enable animation rivaling motion pictures quality hindered production of the world's most powerful game machine and forced Sony to halve its initial shipments in the United States to 500,000 units after its Oct. 26 debut.

The company, in partnership with Toshiba Corp., developed and manufactures a 128-bit processor chip dubbed the "emotion engine," which serves as the heart of the PlayStation 2 game machine. Toshiba, the world's No. 1 notebook computer maker, said it's on course to make 10 million of the chips.

"We have been told Sony will eventually produce 10 million units of PS2 per year," said Toshiba spokesman Kenichi Sugiyama. "We have been ready to supply `emotion engines' for that many consoles."

Sony expects to meet its stated goal to ship about 500,000 PlayStation 2s to the United Kingdom, about 400,000 to France and 350,000 to Germany by the end of March, said Fleur Breteau, a Sony Europe spokeswoman.

Some analysts questioned whether Sony can meet its production goals.

"It's difficult for Sony to double output right now," said Takashi Oka, an analyst with Tsubasa Research Institute Ltd. "Sony's making just 1 million units a month and needs time to tool up for the extra production."

Sony had aimed to be making 1.4 million units per month by now. The machine's predecessor, Sony's best-selling PlayStation game machine, has sold more than 73 million units since its debut in 1994.

In late October, Sony said it had fixed problems found in some chip-making equipment at a plant in Nagasaki prefecture, on the southern island of Kyushu.

Boosting production is a double-edge sword for Sony because the company loses money on each of the 128-bit game machines it produces. Still, it must satisfy a long list of game developers, who are counting on the console to sell well.

Revenue from high-margin game software also is a major source of earnings for Sony, maker of the Grand Turismo series of racing games.

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