Investors dumped Sony shares in Tokyo trading on Thursday after the company disclosed troubles with the launch of its commercially vital PlayStation 3 video gaming console.

Sony shares closed down 1.6 per cent to Y4,970 on the Tokyo Stock Exchange, after falling as much as 2.4 per cent intraday in the wake of the company’s second technology disaster in a few weeks.

Embarrassingly for Sony, once famed for its manufacturing expertise, the launch of the PS3 in November has been compromised by the company’s failure to overcome technical problems in mass producing a laser diode needed to make the product’s ground-breaking Blu-ray DVD technology work properly.

The setback - which follows an earlier postponement from spring to November - has forced a delay in the European launch from November 17 to March, while the number of units that will be available this year in the US and Japan will be halved from 4m to 2m.

“I am very sorry. I think there are many people who are looking forward to PS3, so I really regret the delay,” said Ken Kutaragi, chief executive of Sony Computer Entertainment, who is known as the “father of the PlayStation”.

The delay is a serious blow to Sir Howard Stringer, Sony’s Welsh-American chief executive, who is trying to turn round the electronics-to-entertainment group amid a rash of technology problems.

The PS3 will go on sale in substantial numbers behind both its main rivals. Microsoft’s Xbox 360 was launched late last year, and Nintendo’s Wii is expected to appear in the final quarter of this year.

The delay is the second major dent in the group’s reputation for technological excellence in recent weeks, following a recall of lithium ion batteries used in Dell and Apple computers that will cost it between Y20bn and Y30bn.

Mr Kutaragi said that Sony engineers had assured him that they could start mass production by the end of this month. Nevertheless, the delay will limit shipments to the US to 400,000 when it is launched there on November 17. Shipments for sale in Japan will amount to only 100,000 when PS3 is launched there on November 11.

Mr Kutaragi said Sony had considered air-freighting the PS3 to overseas markets, which would have increased the time available for pre-launch production, but the plan had proved prohibitively expensive.

The company said it was unable to buy-in inventory from other suppliers because the blue laser diode is so technically advanced that few other companies can make it.

Mr Kutaragi admitted that the group’s problems with BD laser diodes raise questions about its ability to deliver state-of-the art technology. “The fact that [Sony] cannot do it means they lack some kind of ability,” he said. Worryingly for Sony, the questions extend to the Blu-Ray Disc itself, which Sony is promoting as the next generation digital recording format.

The PS3, which comes with a BD player, was expected to be the main driver of the BD standard because the PlayStation range sells in vast numbers and because at $599 consumers would be able to acquire the new players relatively cheaply.

Mr Kutaragi said the small number of BD players that will appear on the market meant that manufacturers would not face the same problem as the mass market PS3.

Sony said it planned to catch up with its original plan to ship 6m units by the end of March by ramping up production from 1m units month to 1.2m units.

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