In a development that signals a change in its business model, Sony Corp stated, it’s image sensor business aims to replicate the PlayStation’s success to address its reliance on a handful of manufacturers in the fiercely competitive smartphone market – it plans on selling software by subscription for data-analyzing sensors in situ.
Much akin to its PlayStation Plus video games service, Sony Corp aims to transform its image sensor business into a software platform. The significant change in its $10 billion business amounts is aligned with its pursuit of recurring revenue following years of loss in the fickle consumer electronics sector.
According to analysts, success could serve as a rejoinder to activist investor Daniel Loeb’s calls for the business to be spun off.
“We have a solid position in the market for image sensors, which serve as a gateway for imaging data,” said Sony’s Hideki Somemiya, who heads a new team developing sensor applications.
In an interview, Somemiya said, analysis of such data using artificial intelligence (AI) “would form a market larger than the growth potential of the sensor market itself in terms of value,” pointing to the recurring nature of software-dependent data processing versus a hardware-only business.
Sony has developed what it terms as the world’s first image sensor with an integrated AI processor.
Once the sensor in installed in security cameras, it can single out factory workers not complying with COVID-19 social distance norms, or standard factory operating procedures such as wearing a helmet; it can also be mounted in vehicles to monitor driver drowsiness. More importantly, and this is where its new business model kicks in, the software can be modified or replaced wirelessly without modifying the camera.
Sony is hoping customers will subscribe to its sensor software service through monthly fees or licensing, much akin to how consumes purchase a PlayStation console and then top it up with games or subscribe to online services.
Although Sony has not disclosed a start date for the service, last month at a news conference it said, it saw demand for the service from “retailers, factories – mainly business-to-business”.
Sony is not alone in this sector however. Samsung Electronics Co Ltd and China’s OmniVision Technologies have also expanded their software capability to image sensors; analysts however say, Sony has the lead and a competitive advantage given its 52% market share.
The development comes at a time when U.S. hedge fund Third Point LLC, a minority investor headed by Loeb, continues to push the company to spin off its image sensor business, saying its value could be higher if it was not masked by the complexity of the company.
Sony has countered that argument with Kenichiro Yoshida, Sony’s CEO saying keeping the division in house gives it easier access to group resources and that diversity is the company’s strength.
“CEO Yoshida’s message suggests Sony will focus on profit growth with diversified businesses,” said analyst Junya Ayada at JPMorgan Securities.
With Sony maintaining its technological edge and since it can capitalize and leverage on the technology to diversified applications, provides it a vantage point in these uncertain times, said Atsushi Osanai, professor at Waseda University Business School.
“The next big thing for sensors may be in self-driving technology, but it’s important to explore other applications,” said Osanai.
Still, others said it is hard to factor in the potential of the sensor software subscription service as it could take years for such a business to become a driver of Sony’s overall growth.
“The number of sensors used at factories and retailers will probably be small compared to those for the over one-billion-unit smartphone market,” said analyst Hideki Yasuda at Ace Securities.