Sony and Microsoft contract electronics makers in Taiwan

Sony Corp and rival Microsoft Corp are hiring low-cost makers to produce video-game consoles, setting the stage for a possible price war, the Wall Street Journal reported.

Sony, which produced its PlayStation2 machines in Japan until recently, is contacting Taiwanese companies for making them in China, the paper said, citing Yoshiko Furusawa, a Sony spokeswoman. Microsoft has picked Wistron Corp (緯創資通), a spinoff from Taiwan's Acer Inc (宏電), as a second outside manufacturer of its Xbox player, the paper said, citing unidentified people.

"We are in talks with several Taiwanese makers to do so," said Koichiro Katsurayama, a spokesman at Sony Computer Entertainment Inc, Sony's game unit.

The reported moves come as Microsoft records lower-than-expected Xbox sales in Europe and Japan and struggles to gain ground on industry leader Sony and No. 2 Nintendo Co. Microsoft may be forced to cut Xbox prices, while Sony pared PlayStation2 prices, heightening pressure to trim costs, analysts say.

"It doesn't come as a surprise that they are looking to cheaper manufacturers for assembly," said Richard Chu, an analyst at ING Baring Securities (Japan) Ltd.

"There haven't been any announced changes to the manufacturing process," said David Hufford, a Microsoft product manager. The company is still using Flextronics to make Xbox in Hungary and Mexico, he said.

Sony's Furusawa declined to say which companies got contracts or how many PlayStation machines will be made in China, the Wall Street Journal reported.

Hon Hai Precision Industry Co (鴻海精密), Asustek Computer Inc (華碩電腦) and Yageo Corp (國巨) were named in a Chinese-language economic daily and analysts reports last year for winning orders from Sony to make the game console. No specific companies confirmed the arrangement.