Sony has confirmed that it will eliminate a key microchip from the European version of its PlayStation 3 (PS3) game console, reducing production costs as well as its compatibility with PS2 games.
The move, which is expected to expedite the Tokyo-based electronics and entertainment conglomerate's effort to turn its PS3 operations profitable, helped send Sony shares up 3 per cent by mid-afternoon.
Sony, which competes with Microsoft and Nintendo in the $30 billion video game industry, now makes a loss for each PS3 it sells.
Sony saw its television business posting a profit for the first time in two years in October-December, making its game division's profitability the biggest concern for investors.
The PS3 is set to go on sale in Europe on March 23, following its North American and Japanese launches late last year.
Unlike the PS3 being sold in the United States and Japan, the upcoming European version will not carry the microchip that offers graphic- and data-processing functions for PS2 games, cutting production costs, said a spokesman for Sony Computer Entertainment (SCE), Sony's game unit.
The console will still be equipped with a different chip that processes graphics for PS2 games, but the backward compatibility of the machine will be lowered, the spokesman said. The dual-function chips that will be eliminated from the European version are being procured from within the Sony group.
Sony packs the PS3 with its cutting-edge technology such as a Blu-ray high-definition DVD player and the Cell microchip, dubbed a "supercomputer on a chip," which provides lifelike graphics and high-speed downloading of game software and video clips.
But they have driven up production costs, dragging Sony's game operations into a deep loss for the current business year ending March 31.
Sony said in January that it expected losses in its game unit to exceed its previous estimate of 200 billion yen ($1.71 billion) in the year to March, but would aim to break even on games in the next business year.
In another cost-cutting measure, Sony is planning to introduce Cell chips with circuitry width of 65 nanometres this year, replacing the current 90-nanometre ones.
Narrower circuitry makes microchips smaller, cutting per-chip production costs.
Shares in Sony were up 3 per cent at 6,170 yen in afternoon trade, outperforming the Tokyo stock market's electrical machinery index IELEC, which rose 1.21 per cent.