Sony is to sell the chip manufacturing plant it currently uses to produce Cell processors for the PlayStation 3 games console to Toshiba, part of a scheme that will see the two Japanese giants create an ¥100m ($858,000) chip-making joint-venture.

The new company's name has yet to be set, but it will take over production of Cell and that other key PS3 component, the RSX graphics chip, developed for Sony by Nvidia.

Toshiba will take the biggest stake in the new firm, which the owners hope will begin operating on 1 April 2008. Toshiba will own 60 per cent of the JV, with Sony Computer Entertainment International taking 20 per cent and the broader Sony Group the remaining 20 per cent.

The deal builds upon a JV that the two giants founded in 1999 and which is due to mature at the end of March 2008 - conveniently the day before the new JV is due to start, assuming regulatory approval. The current JV, Oita TS Semiconductor Corporation also makes chips for PlayStations.

Oita's successor will get to use Sony's 65nm, 300mm wafer fab with a view to migrating production to the next size down, 45nm. Intel's first 45nm processors, for comparison, are due to debut on 11 November.

Claims that Toshiba was in talks to buy Sony's Cell operations were first made last month. Later in September, Toshiba unveiled SpursEngine, a graphics chip built out of Cell processor components. Toshiba hopes SpursEngine will become a new force in PC graphics, taking on the likes of AMD and Nvidia.

Toshiba co-developed Cell with Sony and IBM. It has always said it plans to use the technology in consumer electronics products, such as HD TVs.

The benefit for Sony? For a start, it doesn't have to stand the running costs of the Cell plant, and free from direct Sony control, the new operation will be able to pitch for third-party production business. If it gets it, that could help lower the cost of the work it does for Sony more quickly than if Sony was the sole owner and PS3 chips the sole output.

Ultimately, that means lower PS3 production costs, something Sony is desperate to achieve, not only to allow it to charge consumers less for the console but also to boost its own profit margins.