Sony reports “significant” decrease in image sensor sales, operating loss, lowers future sales forecast

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Today Sony released their Q3 financial results and they are not as good as they used to be:

"Sales decreased 12.6% year-on-year (a 16% decrease on a constant currency basis) to 249.9 billion yen (2,082 million U.S. dollars). This decrease was primarily due to a significant decrease in sales of image sensors, reflecting a decrease in demand for mobile products, and a significant decrease in battery business sales. This sales decrease was partially offset by an increase in sales of camera modules which were lower than originally forecasted and the impact of foreign exchange rates. Sales to external customers decreased 7.5% year-on-year.

Operating loss of 11.7 billion yen (97 million U.S. dollars) was recorded, compared to an operating income of 53.8 billion yen in the same quarter of the previous fiscal year. This significant deterioration was primarily due to the deterioration in the operating results of the battery business, including the recording of a 30.6 billion yen (255 million U.S. dollars) impairment charge related to long-lived assets, increases in depreciation and amortization expenses as well as in research and development expenses for image sensors and camera modules, and the impact of the decrease in sales of image sensors.

Sales are expected to be lower than the October forecast primarily due to significantly lower than expected sales of image sensors and camera modules, reflecting a decrease in demand for mobile products and lower than expected sales in the battery business. The forecast for operating income is expected to be significantly lower than the October forecast primarily due to the impact of the above-mentioned decrease in sales and the recording of an impairment charge related to long-lived assets in the battery business during the current quarter.

Sony is currently formulating its business plan for all of its business segments for the fiscal year ending March 31, 2017. With regard to the camera module business, there is a possibility that factors such as a decrease in projected future demand, which caused a downward revision in the forecast for the current fiscal year for the business, could continue to have a negative impact on the business going forward. It is therefore possible that the above-described business environment might result in an impairment charge against long-lived assets in the camera module business."

I have been saying this for a while: once the hype is over, Sony will remain just another camera manufacturer. This was the case with Nikon, Fuji, Leica and many others and Sony will not be any different. I am sure many will disagree.

Via Image-sensors-world

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  • yaley

    “This significant deterioration was primarily due to the deterioration in the operating results of the battery business”
    ..just saying…
    But I do find it interesting, that different sites can have such different interpretation of the same source!

    • Ethan

      Overall, if you read the pdf, income increased this year

      • in the same paragraph further down:

        “as well as in research and development expenses for image sensors and camera modules, and the impact of the decrease in sales of image sensors.”

        • Thom Hogan

          See what I wrote two weeks ago on my site (Coming Photographic Slowdown). The word has been out for awhile through all the supply chain: everyone except perhaps autos and a couple of industrial uses are signing up for fewer image sensors at the moment.

          I believe this is classic market saturation. Sony’s investing heavily into the shoulder of the market slope, and if they keep doing that, it’s going to hurt them financially eventually.

          Note that Sony themselves predicted CAMERA image sensors were going to experience a huge decline through 2018. What they predicted against that was a huge gain in smartphone/tablet sensors. That isn’t happening at the rate they predicted just 18 months ago. Indeed, as I note, it’s turned from growth to decline.

          • Wesley

            I wonder if we will see price cuts (Instant Rebates!) on Sony cameras in the very near future. Maybe a small chance Sony lowers prices on sensors which results in lower prices on other companies’ cameras using Sony sensors…

          • Thom Hogan

            We’ll see price rebates any time the Japanese don’t make their numbers, basically. That’s the way it’s always been. They project out what they’re going to do for a quarter, then manage pricing to micro manage to those numbers.

          • RodneyKilo

            “Sony’s investing heavily into the shoulder of the market slope, and if
            they keep doing that, it’s going to hurt them financially eventually.”

            Sony may well have a reason for that, and the reason is market share.
            Because the market is declining doesn’t mean it will decline to zero. It could well mean it’s just reverting to norm, with 5 years ago being an anomaly bubble.
            If the market will continue to exist five years from now, the last players standing will be the ones who can achieve enough penetration and control of market share.
            Call it three real, viable manufacturers.
            It could well be, very well be, that Sony is determined to hold on to as many segments of the consumer electronics space as possible (it’s already surrendered in PCs and TVs), where possible = being number one, two or three in the market.
            The old GE model: If you can’t be #1 or #2 in your market, get out of that market.
            The investments now can simply be a big push to realize and solidify that market share. We just don’t know what goes on in the executive suite.

          • Thom Hogan

            I’m absolutely sure that Sony thought they were buying market share. But last year they were turning away customers. Those customers went elsewhere. Now to win them back they’re going to have to engage in a pricing war.

            Read the transcript of Sony’s meeting, especially the Q&A (but get a good translation, as the one that is most commonly quoted is particularly bad). Sony’s now saying that they might switch over the Toshiba fab from sensors to logic, and that the investments they just made will have an unpredictable and variable return for them.

        • yaley

          Yes, image sensor sales are down…

          But then this part:
          “Operating loss of 11.7 billion yen (97 million U.S. dollars)”
          is explained by:
          “operating results of the battery business, including the recording of a 30.6 billion yen (255 million U.S. dollars) impairment charge related to long-lived assets”

          So without that its about 150 million US plus?

          In the end they also said sales are down but income went up for cameras/sensors.
          That means they sell more highend cams and less lowend. (To be honest they didn’t release a single something low-end in 2015…)

          • Thom Hogan

            Don’t mix cameras and sensors. Two different divisions, and two different specifics. For the quarter:

            Cameras: volume down significantly, overall dollars taken in down slightly, profit up slightly.

            Sensors and other parts: volume up, overall dollars taken in down significantly, profit turned to loss. Yes, batteries were the primary cause of the loss, but sensor sales year-to-year are down unexpectedly (at least unexpected to Sony).

            Sony has revised their Devices estimates significantly downward for the full fiscal year, as well.

  • Narretz

    I’m pretty sure 1 inch sensors and above are a very small part of the equation. They specifically say the demand of mobile products decreased. All in all it’s still possible that Sony will retain a huge share in sensor production for digital cameras.

  • peevee

    “I have been saying this for a while: once the hype is over, Sony will remain just another camera manufacturer.”

    Sony is so much more than a camera manufacturer. The decrease is primarily because of sensors for smartphones and batteries.

    • also: Olympus is now the best selling mirrorless camera in Japan by a big margin (in 2014 was Sony)

      and this is after Sony released so many new models in 2015

      • EcoR1

        Most of the sold Olympus cameras have a price under 500 euros. As Sony has moved their camera price point significantly higher, they will sell less cameras but with much higher margins. Same thing with lenses.

        As with mobilephones the market share is not telling the whole picture, Apple is still getting basically all the market profit and android manufacturers are killing each other with a race to the bottom.

        • Olympus has few models over $1,000 and I think this is what sells.

          • Eric Calabros

            at least with Oly bodies they get “style”, both in hardware and jpegs.

          • YourFace


        • Piotr Kosewski

          I don’t see how moving to a higher price point automatically results in higher margins…

          Apple is not successful because their products are “at a higher price point”. Their successful because they have a huge and dedicated user base. They built a isolated ecosystem. They can ask more than other manufacturers for a similar product.
          Sony also has a fan base, but it’s too tiny to base their survival on Apple-like strategy.

          However, if you look at the last few years, Sony is trying to become “Apple” of camera business. They make camera modules for their phones, they offer apps and so on. But it’s too slow, too erratic.
          Before they know… Apple themselves will become the “Apple of camera business”. 🙂

          • MdB

            “Their successful because they have a huge and dedicated user base”

            I thought you were an idiot, now you have proved it.

          • RodneyKilo

            True, but everyone wants to become the Apple of the [fill-in-the-blank] business. Nikon showed that years ago when it launched the V1.
            Now, Apple itself wishes it could be the Apple of the Apple business again.

          • S.Yu

            Oh so Nikon tried to be Apple by releasing simplistic overpriced products!

      • MdB

        “and this is after Sony released so many new models in 2015”

        Two, does that count as ‘so many’? A7R II and A7S II. They are also the most expensive mirrorless ever released, which is unlikely to be volume movers (excluding Leica here).

      • peevee

        In Japan. 1.5% of world population, the craziest ones. Sony makes cameras for the world, not quite for Japan now (no tiny cutish GM1s and GM5s and Pentax Qs etc).

        • Kallai Iosif Gavril

          And 10% of camera sales. China have 25% of world population but not 25% in camera sales. What a stupid comment.

          • peevee

            10%, so what? Make your products for 10%, lose sales for 90%.

          • peevee

            And guess where camera sales are growing?

    • J.Coi

      This is the same as my understanding. The news from Sony is especially news about image sensor industry.

    • Piotr Kosewski

      That’s exactly why Sony camera fans should be afraid. People have been pointing this out for years. Canon, Nikon and Olympus need the camera branch. They will fight for it.
      For many other manufacturers the camera business is so small, they accept losses (Ricoh, Panasonic, Fuji).

      Sony is possibly the worst case. Their camera business is fairly small, so they can close it down (or fork) without much fuss. But at the same it’s big enough to lose them a lot of money if things go wrong.
      For many years Sony’s camera division was funded only as a showcase of superior Sony sensors (a “cattle prod” for Nikon and Olympus to buy them). It became somehow self-sufficient lately, but we’ll see what happens next…

      • peevee

        For Olympus it is small too.

        • Piotr Kosewski

          Financially speaking you’re right. But they would most likely defend their camera business for emotional and marketing reasons.
          Let’s not forget they were loosing money on digital cameras for years and there wasn’t even a tiny suggestion that they could close the camera division.

          Sony is an business conglomerate – a totally different entity.
          If a division generates losses, they’re almost automatically trying to remove it from core business. Such branches are spun off and repaired or sold. I don’t think any other camera manufacturer today would dump A-mount so quickly.

          Similarly, when Sony realized there is money to be made on FF mirrorless, they’ve totally frozen APS-C E-mount development.
          It might be revived with the a6100, but I seriously doubt that. And there is also the question of price segment. a6000 is a very good camera, but at the moment it is also much cheaper then 1″ compacts that Sony is so proud off. So the next APS-C body might be really expensive or with features far behind the RX100IV – not exactly what E-mount crowd hopes for…

          • peevee

            “I don’t think any other camera manufacturer today would dump A-mount so quickly.”

            You mean like Olympus dumped OM and then Four Thirds in only 7 years?

  • TheRealestInDaHood

    Fonyboiiis over at SAR see things differently :”Sony Q3 financial report: Less sales but increased profit.”

    • Yes, what I wrote is also just my own opinion.

      • TheRealestInDaHood

        There are “opinions” in reports. You’re spot on. Fonybooiiis need to read up on economics 101

      • TheRealestInDaHood

        Btw Peter, how about you stop stealing rumors from other pages you dirty gypsy?

  • EcoR1

    This is basically a FUD-post from administrator. Sony is seeing a major profit increase with sold cameras. Moving the product mix to a high end mirrorless is clerly a good strategy, because there is no competition. With A7-series Sony has basically rescued their camera business and with each year we are going to see more and more professionals moving to their system. Leak from Canon and Nikon will continue as long as they refuse to create their own FF-mirrorless system.

    • RodneyKilo

      Changing the product mix to a premium, high-margin line-up is a survival strategy in which one is reacting to the market rather than driving it.
      Three problems:
      1) How do you suddenly declare you are a high-end manufacturer capable of commanding a premium price when you have only been known as a middle-of-the-road vendor all along? You can’t shift your brand recognition on a dime.

      2) How do you suddenly declare you are a high-end manufacturer capable of commanding a premium price when you have so many different models under your brand being remaindered at very competitive prices?

      3) How do you succeed at making yourself a high-end brand when every one of your competitors is now adopting the same survival strategy and trying to do the exact same thing? Hint: A broad consumer market can’t exist with only Veblen goods if nobody is making the run-of-the-mill stuff to contrast them with.

      This premium manufacturer stuff sounds really good when you are pitching it to the boardroom- sure, that’s the ticket! Much much harder to pull off when everyone else is adopting the same strategy.

      • Originaru

        Perfect, exactly as i see the situation.

    • Thom Hogan

      “Major profit increase.” I’d call it moderate. The GPM is almost respectable now, but the sales are trending rapidly downward and forecast to continue that way.

      Sony did the right thing in moving the still cameras into the pro video business division and then de-emphasizing the low end and emphasizing the high end. Essentially, they decided to accept a smaller but sustainable business.

      As for your conclusion about pros moving to Sony and Canon/Nikon leaking, you might want to look closer at the actual numbers. With the declining volume of the low end, Sony didn’t make any significant progress in taking market share last year. I don’t believe they’ll do so this year, either.

  • Jeffry De Meyer

    Painful, Sony made big investments in sensor production facilities since 2012. if everything went as planned they should be able to increase their production an extra 75.000 wafers per month starting this summer

    • Thom Hogan

      Not happening. Read the transcript.

  • Marco –

    Sony should do like samsung and pull out the camera business. Only one will survive at the end, probably canon. If they did a line of decent mirrorless today (apsc and ff), they would crush everyone else

    • Zos Xavius

      Your want less competition? Seriously??

      • MdB

        Of course, all fanboys do.

        • Marco –

          Fanboy…of what? I have samsung gear and I’m very sad for they decision, since I’m heavy invested in nx system and lenses.

          Yet, from a managerial point of view, I can understand their decision. They did the best apsc camera and few ppl even cared to test it.

          Canon does a canon M with ridiculous hw and it sells like hotcakes.

          Just because it’s canon.

          Photography is a strange field. It’s not like computer hw, when the best product often wins and where ppl document themself before buying.

          In photography most ppl buy based on brand. Even when they are not invested into that brand!

          • Zos Xavius

            Some people research. When I bought my first DSLR I knew it was a large investment that would require commitment. I was using panasonic cameras at the time and I almost bought a G2. m4/3 didn’t really do much for me though and the noise on those early 12mp sensors wasn’t great. I ended up with a used Pentax K-7 because the IBIS and weather sealing were really key points. That ended up being a really good camera to me so I just kept buying more and haven’t ever looked back. Even now there isn’t anywhere else I would rather go. The price/performance ratio of pentax gear is pretty hard to beat. Their legacy lenses are good to stunning and are pretty inexpensive mostly. If I sold all my pentax gear and switched to nikon, I’d probably have to spend 2-3x to replace what I have.

          • Kunzite

            Unlike Zos Xavius, I’m not saddened at all to see Samsung go (except for their users, who would have to jump ship at some point). A traditional camera maker like Minolta, now that is a loss.

            Samsung… never really committed; they had some sort of partnership with Pentax (in which they sold Pentax products pretending they’re their own), gave up on that and launched their own system. They made a series of uninspiring cameras, then one excellent camera which probably was supposed to “fix” everything that was wrong – guess what, it didn’t.
            The camera market doesn’t work this way.

          • Kunzite

            P.S. I’m not happy either, by the way.

    • markz

      frankly ridiculous statement this is not highlander and we’re not going to see all but one die off.
      Maybe a few will withdraw now the easy money of film to digital conversion are over, as has the 1 or 2 year replacement purchases as technology increases taper off.
      we’ll probably see (dedicated) cameras move back in to being a premium product with lower sales, higher margins.

  • Camaman

    I guess everybody that can and need alread own a camera or a phone.
    Judging from how pleased most are with their images it is no wonder it is stagnating and falling.
    I mean the world population is not growing fast enough for their continous growth economy idea.

  • Jeff Curtner

    “I have been saying this for a while: once the hype is over, Sony will remain just another camera manufacturer.”

    It’s the slow down of iPhone sales, the large sensors (1″, APS-C, and FF) are very small part of the Sony imaging sensor business.

  • Jón Ingólfur Hermannsson

    time to focus on making Sony branded lenses 🙂

  • WML

    The unfortunate problem that all camera manufacturers face is the increasing saturation of the marketplace and a slowdown of the global economy. With China’s growth rate significantly slowing down, demand from Chinese consumers will decrease. Significant reduction in employment (in China) may occur, which will further dampen consumer demand in China. In the meantime, demand in Asia and other nations will continue to diminish, as economic uncertainties become deeper. Note that in the United States, fourth quarter estimates point to a slowing economy, which may be sliding into recession in the next year. Europe is in worse shape. How will this impact camera sales?
    The smartphone market is reaching the saturation points in many places around the world. As China’s economy slows, demand for products will decrease as people hold on to their devices longer. The same is true in other countries. Low cost competitors are still buying sensors, but even their sales are not enough to counter the decrease in sales from companies such as Apple and Samsung. Samsung in particular has been hurt by significant decreases in its high end smartphone business. Apple is in a slightly different situation, as they are the sole source of ios devices while Samsung battles increasingly sophisticated lower cost providers in China. Thus, with many people postponing updates to their current smartphones, the largest sensor manufacturer (Sony) is feeling the pinch.
    Now, the battery unit write off is a one off – those type of write offs are usually done when other parts of the business are experiencing a down cycle, as additional negative news can be better absorbed as part of an overall less than stellar financial report. The good news is that in spite worsening conditions, Sony still managed to be in the black thanks to their diverse portfolio of products.
    Canon is a large company but they too are feeling the effects of economic slowdowns and lengthening upgrade cycles. Nikon and other manufacturers are in a similar position. It will be interesting to see what the adoption rates of the new cameras coming from the various manufacturers. I suspect that while they will sell, the numbers will be less than the more stellar internal forecast in the various entities.

    As far as Olympus is concerned, while they do have several higher end camera bodies, the bulk of their sale is in the lower end to middle tier camera bodies. They do have significant sales in the higher end equipment, but as a percentage of their product mix, it is not the same as Sony. Sony has not released any new low end or mid tier camera product in over a year. With Sony’s average selling price (across their entire line) about the same as Olympus’s high end selling price, it is not a surprise to see Olympus gain traction as far as unit sales are concerned, as price conscious consumers opt for less expensive products (that are also quite good).
    The various CIPA reports in the last few months have pointed to a global slowdown in camera sales. Slowdowns have smaller effects on higher end products, as people with means will usually still continue to buy. What this means is that Sony’s strategy of shifting to higher end products in lieu of selling more lower end products is not necessarily bad in the economic climate that the world is in. Is it sustainable in the long run? That remains to be seen, but I believe that Sony will have to release products in the lower tier in order to prevent a major erosion in their market share.
    I think people should hope that each camera company does well in this environment. It will be challenging to all of them and I would expect revenues to only increase slightly (or most likely, remain stagnant or even decline). Profits will be hit as companies offer incentives to bolster sales. Sony is an important player in the industry. In some ways, their sensor business is a bell weather for the industry (camera phones, etc.) as a whole. This is not the time for gloating. In tough economic times, every manufacturer will encounter turbulence. Let’s hope the downturn is not prolonged (and hope that it Is not steep).

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