TOKYO -(Dow Jones)- Toshiba Corp. (6501.TO) formally announced Tuesday that it will discontinue its next-generation DVD business, a move that will likely close the books on what had become one of the consumer electronics industry's biggest format battles.
But in a sign of its determination to bounce back quickly by investing heavily in other business areas, the Japanese electronics company at the same time unveiled a plan to spend together with its partner SanDisk Corp. (SNDK) of the U.S. more than 1.7 trillion yen (US$15.7 billion) to build two new NAND-type flash memory plants in Japan.
The Tokyo-based electronics conglomerate said it will cease research and production of HD DVD equipment and will stop selling such products around March 31. Toshiba has so far sold about 1 million units of HD DVD equipment worldwide including players and recorders.
"We carefully assessed the long-term impact of continuing the so-called next generation format war and concluded that a swift decision will best help the market develop," said Toshiba President and Chief Executive Atsutoshi Nishida. " It was a tough decision. But it would have a big impact on our management if we continued" the HD DVD business.
The decision represents the defeat of the HD DVD format developed by Toshiba to the rival camp, led by Sony Corp. (6758.TO), whose DVD players and recorders operate on the Blu-ray Disc standard.
The high-definition DVD market is key for both the movie business and the consumer electronics industry, with sales of players and discs likely to provide a lucrative stream of revenue for years to come. Both Sony and Toshiba have poured significant resources into their efforts to win customers over to their formats.
Sony is part of a Blu-ray consortium that includes Japan's Matsushita Electric Industrial Co. (6752.TO) and Samsung Electronics Co. (005930.SE) of South Korea. In addition to Toshiba, HD DVD backers include Japan's NEC Corp. (6701.TO) and Sanyo Electric Co. (6764.TO), as well as Microsoft Corp. (MSFT) and Intel Corp. (INTC).
Toshiba said it still doesn't know what impact from its decision to pull out of HD DVD activities will have on its earnings.
"We are reviewing our earnings outlook for this fiscal year ending March and will release details once the review is determined," the company said in a release.
In the battle for a high-definition successor to the current generation of DVDs, both parties have gone eye to eye to promote their own formats after they failed to avoid a repeat of the VHS-vs-Beta battle of the early 1980s.
But the Blue-ray format recently gained traction. Time Warner Inc.'s (TWX) Warner Bros. movie studio decided last month to support Blu-ray exclusively. Warner's announcement was effectively a death blow for HD DVD technology. In the past week, major retailers such as consumer-electronics giant Best Buy Co. Inc. and Wal-Mart all sided with Blu-ray.
"The change in Warner Bros.' decision was a real bolt out of the blue. The impact was large as U.S. retailers reacted to this" decision, Nishida said.
New Flash Memory Chip Plants
Toshiba said the new flash memory chip plants are slated to kick off production in 2010, with each designed to churn out chips based on 300- millimeter wafers.
The new plants will be located in Yokkaichi, central Japan and Kitakami, northern Japan.
Toshiba, whose NAND flash memory operations have become an important driver of profits, said it will jointly invest and share output of chips with SanDisk at one of the new plants.
Flash memory is used to store data in electronic gadgets such as portable music players and mobile phones, and is starting to replace hard disk drives in laptop PCs.
Toshiba is the world's second-largest NAND flash producer by revenue after Samsung Electronics Co. of South Korea.
Shares in Toshiba fell 0.6% to Y824 on the Tokyo Stock Exchange Tuesday after gaining 5.7% Monday.