Wednesday September 27 9:24 PM ET

Sony Unable to Meet PlayStation 2 Demand: industry wide component shortages cited

By Timna Tanners

LOS ANGELES (Reuters) - Sony Computer Entertainment America Inc. on Wednesday said it would halve the initial roll-out of its long-awaited PlayStation2 video game console in North America and could not meet holiday demand, adding to growing evidence of parts shortages among electronics makers.

The unit of Japanese electronics giant Sony Corp. (6758.T)(NYSE:SNE - news) is a month behind in its production schedule, and it will offer just 500,000 PlayStation2 units at its Oct. 26 U.S. launch, rather than an initially planned one million units, executives said on a conference call.

``I don't think everyone who wants one will get it,'' Sony Senior Vice President Jack Tretton said, when asked about holiday sales. ``I think by October 26 it will be difficult and the situation will improve after the holiday season, in the January to March time frame.''

Company executives declined to specify which components were in short supply for the much-anticipated successor to its popular PlayStation video game player, but said the shortages were not related to the console's DVD capacity. But Tim Bajarin, an analyst at San Jose, Calif.-based technology firm Creative Strategies said makers of electronic products have been hampered by all sorts of component shortages from memory chips to flat panel displays all the way down to simple connectors.

``We're experiencing shortages all across the board,'' Bajarin said, adding that the delays did not surprise him. He added that it is likely Sony was having problems meeting the demand for memory in the PlayStation 2 because the machines are highly complex, and he said strong consumer demand for Internet-related products has led to the industry-wide component shortages.

Bajarin said Sony has placed an emphasis on feeding the demand for PlayStation 2 in Japan, so it might have steered some of its holiday production away from North America to stock retail shelves in Japan.

Sony launched the Japanese version of PlayStation 2 on March 4, and it became an instant bestseller with over 1 million units bought from retailers in the first week.

The PlayStation2 has been one of this season's most widely anticipated products because, compared with its predecessor, it offers faster game playing speeds, better picture quality and added features like Internet access and DVD movie playback.

In recent months, industry analysts have fretted over U.S. toymakers like Mattel Inc. (NYSE:MAT - news) and Hasbro Inc. (NYSE:HAS - news) whom they feel may be unable to meet holiday demand for sophisticated toys due to shortages of microchips.

Sony said delays would not affect projected North American PlayStation2 shipments of 3 million units in its 2001 fiscal year, which ends in March. It added it still expects to produce 10 million units worldwide in the same time period.

After the 500,000 units available at the U.S. launch date, Sony estimated it would be able to supply 100,000 units per week to the U.S. market.

Tretton said that each retail outlet would get half of the amount of originally expected quantities for sale, spreading the diminished supply evenly across the country. Sony has discouraged retailers from pre-selling the consoles and would not factor existing orders into its supply plans, he said. Sony said it was working to fix the component supply problems. It planned to increase production capacity to more than 1.0 million units from 400,000 a month to a target 1.4 million units monthly by the end of the calendar year.

The company anticipated shipping 1.3 million PlayStation2 units in North America through the winter holiday season. It said it would have 26 software titles available at launch time, rather than an originally expected 15 titles. Sony's American Depositary Receipts (ADRs) traded on the New York Stock Exchange (news - web sites) closed down $9-5/8, or 8.8 percent, at $99-3/8. The news announcement came after the market closed.

http://dailynews.yahoo.com/h/nm/20000927/bs/sony_playstation_dc_3.html

-- Carl Jenkins (Somewherepress@aol.com), September 27, 2000

Answers

This is a throwback to the old supply chain disruption theory about y2k.

-- Uncle Fred (dogboy45@bigfoot.com), September 27, 2000.

An old economics professor told me a long time ago "one way or the other everyone directly or indirectly works for the federal government". Here we are in the middle of a serious oil shortage and we're fretting over PlayStation 2 shortages. Another example of the government mis-allocating scarce capital to the entertainment industry.

By the way, this is a great site. All I can do is give you an attaboy.

-- David Williams (DAVIDWILL@prodigy.net), September 28, 2000.