Sony seen building China chip plant


Sony already makes its Vaio line of laptop computers in China, an increasingly important market for the company

By Alex Frew McMillan

TOKYO, Japan (CNN) -- Sony Corp. is planning to build a chip-assembly plant in China, the company confirmed on Monday.

"We are looking at the Chinese market, definitely it's a great market," spokeswoman Aki Shimazu told CNN.

The factory would "most likely be a chip assembly plant, not wafer processing. The chips would be done in Japan and shipped to China for developing," she added.

But Sony said details of the plant have not yet been confirmed. The Nihon Keizai Shimbun reported over the weekend that the factory would cost up to 10 billion yen.

"We haven't confirmed anything about the timing, location or anything," Shimazu said.

An increasingly important market

Sony, the world's largest electronics maker, is looking to assemble chips closer to an increasingly important market.

The factory will be built in the city of Wuxi, in Jiangsu province, according to the Nikkei. Sony stated even that is unconfirmed as of yet.

Sony is already producing its popular Vaio line of laptop computers in Wuxi. A China plant would be run out of Sony's subsidiary in that country, based in Beijing.

Sony has already moved some chip operations to Thailand to cut back on costs. Sony confirmed it would likely send partly finished chips from its factories in Japan for finishing in China.

Production moving out of Japan

Many of Japan's chipmakers are cutting unprofitable chip lines and exiting certain businesses altogether.

NEC Corp., one of Japan's Big Five, said last week it will spin off its chip business into a separate public company as of November (full story).

Competition from cheap chip producers in South Korea and Taiwan has hurt the bottom lines of Japan's chip companies, which have a higher cost of land and labor.

Now even Taiwanese chip makers are looking to shift production to countries such as China, where land and wages are cheaper.

Sony stock down on Monday afternoon

Companies like Sony are also keen to develop China as a market, with demand for consumer goods growing rapidly. China was the fastest-growing economy in Asia last year.

Sony stock is down 0.14 percent at 7,250 yen on Monday afternoon, after initially jumping on word of the China plant. That's on a day the Nikkei is almost standing pat at 11,856.54, up just 0.08 percent.

The stronger yen has been hurting stock in large exporters like Sony. The currency now stands at 125.71 on Monday afternoon, with the dollar down across the board against Asian currencies.