Sony Seen Restored Using Chips in Market Fighting Disease (Tokyo)
TOKYO — Rising rates of cancer, obesity and heart disease may offer a path back to health for Sony as the ailing Japanese maker of televisions, cameras and game consoles turns to semiconductors to end unprecedented losses.
Japan's largest consumer-electronics exporter will speed up a move into health equipment by using the edge its new image-sensors have over rivals, incoming Chief Executive Officer Kazuo Hirai said. The medical field could become a main profit source, Hirai said, as Sony cuts targets on PlayStation 3 units, Blu-ray disc players and Vaio computers.
"We can leverage our technology base in image-capturing sensors, lenses, 3-D technology, image processing, to mention just a few areas," Hirai said Thursday. "Those are areas where we already have in-house technologies that really allow us to differentiate ourselves."
Sony won a boost after its smaller and more efficient CMOS chips were used in Apple 's iPhone 4S. It's now targeting endoscopes used to look inside body cavities and other applications. Medical devices mark a further retreat from consumer products, where Sony has struggled against cheaper South Korean and Chinese rivals and Apple's hit releases.
"They are looking for new markets that can support their strengths in making high-quality goods," said Nobuo Kurahashi, an analyst at Mizuho Financial Group. "Medical comes to mind," he said. "It's a market where people are prepared to pay for quality."
Sales of audio-visual goods such as Trinitron televisions and Walkman music players accounted for 89 percent of Sony's 1.05 trillion yen ($13.6 billion) revenue in 1981. Thirty years later, the share from consumer products has fallen to 52 percent.
Sony is committed to the TV division, which by the end of March will have lost about 700 billion yen over eight years, Hirai said, but it will cut the range of sets. Sony will also review more than 2,000 consumer products it makes, and may exit unprofitable businesses. Announcing third-quarter earnings on Feb. 2, Sony forecast a 220 billion yen loss in the year ending March 31, the longest line of red ink since it went public in 1958.
Hirai takes over in April from Howard Stringer, who spent seven years restructuring the company, trying to marry Sony's engineering capabilities to gaming software, music and film content. But Cupertino, Calif.-based Apple did a better job of delivering the integration of design and software across a platform of products, and Suwon, South Korea-based Samsung Electronics undercut Japanese manufacturers on cost.
Sony's market value of $20 billion is one-sixth its 2000 peak. Samsung overtook Sony in 2002, and plans capital expenditure next year that's greater than its rival's entire stock valuation. Apple, worth less than $20 billion in 2000, is the world's most valuable company at about $460 billion.
Sony will "speed up" development of its technology and seek new products in which CMOS, or complementary metal-oxide semiconductors, can be used, Hirai said. Executive Vice President Hiroshi Yoshioka will head the medical business, and Tadashi Saito, who leads Sony's chip operations, takes on the new role of chief strategy officer.
A breakthrough in Sony's CMOS technology that can deliver crisper images in dark conditions, such as those inside a patient's colon or esophagus, has helped the company gain sales.
"Sony is way ahead of its rivals," said Yuji Fujimori, an analyst at Barclays who expects the chip unit to overtake financial services as the company's most profitable division. "It's got good margin, too."
Fujimori predicts operating margins on semiconductors will jump to 17 percent by March 2014 from 10 percent this year. CMOS may help lift operating profit at Sony's semiconductor division to 90 billion yen in the year ending March 2014, from 40 billion yen in the 12 months to March 2012, he said.
Sony is spending 140 billion yen to boost CMOS production, aiming to win a 30 percent share of shipments in the market for image sensors used in mobile phones, compared with 11 percent for the year ended March 2011. Sony's monthly capacity for chip wafers used to make the sensors will be lifted to 50,000 units by March 2012 and 75,000 units in the following three years, from 25,000 in Dec. 2010.
Longer, more sedentary lives and richer diets are driving an increase in heart disease, cancers and diabetes, spurring demand for faster and more portable equipment to treat them. Sales in the world's 10 biggest markets for medical devices are estimated to grow 6.8 percent a year between 2010 and 2015 to reach $228 billion, according to MarketsandMarkets, a marketing research firm based in Dallas.
Global sales of CMOS chips for medical and scientific equipment are forecast to grow at an annual compound rate of 21 percent between 2010 and 2015, Lineback said. The market for camera phone sensor sales is projected to grow about 8 percent a year over the same period, he said. Mobile phones will account for 49 percent of CMOS demand in 2015, from 62 percent now, IC Insights said.
— With assistance from Kanoko Matsuyama in Tokyo.
— Editors: Two photos (SONY) available at www.wpbloom.com.
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