A recent article titled "Videogame Whiz Reprograms Sony After 10-Year Funk" appeared in yesterday's WSJ. The article discusses how Sony has lost it's way and as commoditization begins to creep into the market they need to innovate and stay ahead of this this natural progression in the market. Ken Kutaragi, the creator of the PlayStation has been asked to remake the company's electronics strategy.Kutaragi points out that a product like the PlayStation has its innovation in the processors not the outside box which he likens to a costume. This is why he has decided to pour $4.5 billion dollars into semiconductors over three years and one of their creations will be a cell chip which IBM and Toshiba are also involved in creating. These companies hope this chip will be to home entertainment devices what Pentium chips are to PCs.The issue here is that they will be competing with Intel and that is never a good thing. In truth, Intel itself is not resistant to the market forces of commoditization as AMD has recently done a number on them resulting in reduced earnings estimates of around half a billion dollars. It seems that AMD is gaining share in markets such as China and India. Intel's brand in these countries is not as strong as it is in the states and in these countries, premium brands in general aren't as important as in the west. At least not yet.But getting back to the Sony versus Intel fight. Microsoft, a natural Intel Ally is eyeing consumer electronics and a renewed and continuing alliance between Intel and Microsoft in consumer electronics is to be expected. Intel and Microsoft will be in a superior position to Sony as the chips they base their devices on will either be Pentium based or in some ways leverage the Pentium R&D. So Intel's development costs should always lag those of Sony.What will we make of Sony's semiconductor decision in a few years? Will this approach be the semiconductor equivalent of the Betamax where the rest of the industry rallies around an Intel and Microsoft based VHS strategy? That is how I see the war shaping up. Of course predicting outcomes of such large and complex battles can be a challenge so far out but one thing is for sure, Intel will always have the advantage in semiconductors so Sony will have to do an amazing job to win in the consumer electronics business of the future.