Friday, 28 March 2014

Sony counts on "selfies", video calls to drive image sensor growth

TOKYO, March 25 (Reuters) – Sony Corp is counting

on the boom in smartphones and the market’s voracious appetite

for megapixels – vital to better quality video calls and

“selfies” – to sustain the double-digit revenue growth in its

image sensor business.

Imaging – both cameras and sensors – is one of three pillars

along with Xperia smartphones and PlayStation consoles that the

company is leaning on to stop the haemorrhaging at its flagship

electronics division. Sony expects its sales of imaging sensor

chips to jump 16 percent to 360 billion yen ($3.52 billion) in

the year ending this month.

Sony dominates the imaging sensor segment. Its high-end

imaging chips are the “film” in the main cameras of both Apple

Inc’s iPhone 5S and Samsung Electronics Co Ltd’s

Galaxy 4, according to a break-down analysis of

those products.

Sony has had little business selling lower-quality sensors,

which are typically used in front-facing cameras, said Yutaka

Okamoto, president of the company’s device division.

But now, some smartphone makers are upgrading their

front-facing cameras for users who want sharper self-portraits,

and that has opened up a whole new market for Sony, Okamoto


Several fast-growing Chinese smartphone makers, keen to move

upmarket, are also beginning to put in orders for Sony’s

high-spec chips, he said.

The division could get an even bigger profit boost from its

nascent business making high-margin camera modules, which

include lenses and circuitry as well as sensors, while tablets

as well are joining the bandwagon towards more megapixels and

higher resolutions.

Despite its lead in sensor technology, however, Sony faces a

rising threat from a familiar rival – Samsung Electronics. The

South Korean tech giant has hammered Japanese electronics makers

in businesses from TVs to memory chips.

Samsung’s newest flagship smartphone, the Galaxy S5, is due

to be fitted with an image sensor developed and manufactured

in-house by the South Korean company, with Sony no longer the

main supplier.

“Our strength – and Samsung’s – is that we can accumulate

expertise on our own production lines,” Okamoto said.

“The fact that Samsung makes their own products on their own

line with their own technology, that’s a threat,” he told

Reuters in an interview last week.


Sony is looking to expand its sensor production capacity

next year with a factory in northern Japan it agreed to buy from

struggling chipmaker Renesas Electronics Corp for a

total investment of 35 billion yen ($342 million) including new


Sony has calculated that capacity at its existing factories

would be unable to keep up with demand by mid-2015, even with a

drop in demand for compact camera sensors, Okamoto said.

Sony and smartphone memory chip maker Toshiba Corp

are the only big Japanese chipmakers expanding production, while

Renesas has restructured to focus on automotive chips and

Panasonic Corp has sold most of its chip plants to

foreign players.

Elpida Memory, Japan’s last maker of PC memory chips, was

bought by Micron Technology last year after seeking

bankruptcy protection.

Sony says its image sensor business is turning a profit,

while other major divisions such as TVs and PCs are in the red

and the company as a whole expects a 110 billion yen net loss

for the year to March 31.

Macquarie Capital Securities director of research Damian

Thong estimates the sensor business earns an operating margin of

10 to 15 percent.

Sony says its global market share for smartphone image

sensors is at 44 percent, mainly in the back-facing cameras used

to snap photos. Screen-side sensors tend to be of lower quality,

and that market is led by Omnivision Technologies Inc,

the No.2 in market share. Samsung is third, according to Techno

Systems Research Co, a Tokyo-based market researcher.

As Sony grabs more sensor business in screen-side cameras

and in Chinese smartphones from fast-growing manufacturers such

as Xiaomi that tout high-end, made-in-Japan parts as a selling

point, Sony’s device business is increasingly tied to the

smartphone market.

But Okamoto plays down worries that smartphone growth might

peak out within the next few years, citing a number of other

promising markets for image sensors.

“Our hope is that wearables are next. We also expect to see

increasing demand for sensors used in medical devices, autos,

and in agriculture,” he said.

($1 = 102.2350 Japanese Yen)

(Editing by Edmund Klamann and Ryan Woo)

(c) Copyright Thomson Reuters 2014. Click For Restrictions –

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