Sony’s sensor business – the engine for its growth

With Sony’s sensor business contributing the bulk of its 2017-2018 earnings, the company plans on ramping up their deployment in factory automation, image sensors and self-driving cars, key technologies for tomorrow.

Riding on the surging sales of its image sensors, Sony Corp is poised to report its highest-ever earning this year. The firm also plans on capitalizing this technology for its deployment in self-driving cars and robotics.

For a company that was once famed for its consumer electronics, its new found focus on gaming and image sensors marks a strategic shift and significant turnaround.

According to Sony’s forecast, its operating profits through March is set to more than double to $5.6 billion (630 billion yen) with its image sensor business being the biggest driver of growth.

As per the company’s executives, a strategic change in the company’s mindset as well as a technological breakthrough in image sensors is what is the driving factor behind its success.

With its sensor, capable of capturing more light thus producing sharper images, capturing consumer’s demand for better smartphone cameras, Sony has been able to reconfigure the sensor layout, known as backside illumination, and has managed to capture 50% of the market for image sensors.

“We knew we wouldn’t be able to win if we did what our rivals were doing,” said Teruo Hirayama, Sony’s technology chief for its chip business.

Sony’s success “is really a function of having decided a long time ago to focus on that niche within semiconductors,” says Andrew Daniels, a Tokyo-based managing director at Indus Capital, an investment management firm.

He went on to add, “The process technology is very much that kind of ‘takumi-no-waza’,” a Japanese phrase for the pursuit of manufacturing perfection.

“Sony used to be obsessed with the idea that its technologies should be kept within the group for use only in its own products,” said Atsushi Osanai, professor at Waseda University’s business school. “Selling components outside the firm was out of line with Sony’s traditional business model.”

Sony’s sensor business got a boost when Kazuo Hirai, the company’s CEO initiated a shake-up calling for each division to be more independent and profitable on its own.

“It was a great help for us to be told that we should operate independently,” Terushi Shimizu, the chief of Sony’s chip division, said, “rather than just belong to Sony.”

But with its peers, including Samsung and OmniVision Technologies, stepping up their game, Sony is bracing for itself for intense competition in the sensor market, especially those that are aimed at robotics and self-driving cars.

Investors say, Sony has a technological edge and that its peers will take time to replicate.

“Sony has been trying to be ahead, but could face a turning point in a year or two,” said Kun Soo Lee, senior principal analyst with IHS Markit in Tokyo.

According to analysts, the company is developing sensor technologies that can rapidly detect invisible light and measure distances both of which are extensively used in factory automation, autonomous driving and robotics.

“Time-of-flight” sensors, for example, calculate distances by measuring the time it takes for light to reflect from an object and could be used in drones or robotics for gesture and object recognition.

“It’s clear that we are currently dependent on the smartphone market,” said Shimizu, Sony’s chip business chief. “The market’s shift to dual-lens cameras from single-lens is good for us, but how long is this going to last as the market is only growing 1 or 2 percent?”

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