Sony mobile phone crashes! The laggard who guards the sentiment

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It took Sony six years to finally get out of the shadow of bankruptcy and have a chance for revival.

Recently, the large group, which once suffered losses that affected the whole of Japan, announced its financial report for the second quarter of fiscal year 2018. Sony Group's net profit for the quarter was 173 billion yen (about 1.552 billion US dollars), a year-on-year increase of 32%, and both its turnover and profit exceeded analysts' previous expectations.

Looking at the financial report, Sony's 58-year-old new head, Kenichiro Yoshida, with his head full of white hair, should have breathed a sigh of relief.

Because these days are not only the days when he and his old rival Nintendo release their financial reports at the same time, but also the day when he takes office for exactly six months. And this financial report is the half-year examination paper he submitted to the board of directors. Any number in it will become the fuse for his dismissal. Fortunately, the results are not bad.

But upon closer inspection, amid all the good news, Sony's once flagship business, mobile communications (mobile phone business), has become the only loss-making business among the eight major businesses, with a loss of US$262 million in just one quarter.

Once upon a time, relying on the Sony Ericsson brand, Sony's mobile phone business once reached the top five in the global mobile phone sales rankings, and was ranked among them as a high-end brand.

But faith cannot recharge the market, and past glory cannot save the current decline. From revenue to technology, from the world to Japan, the current Sony mobile phone has become a loss-making burden for the giant. Yoshida Kenichiro, who took over the baton of Hirai Kazuo to revitalize Sony, should now cut off this burden with a sharp knife or continue to keep it to fight for the 5G era and preserve its strength? This is a question.

With its technological strategy in disarray, global market collapse, and years of losses, perhaps it is time for Sony to get rid of its mobile phone business.

With continuous losses in revenue and global failure, Sony's mobile phone is turning from a belief into a burden

Although everyone knows Sony, not everyone understands Sony.

This 73-year-old technology giant was originally founded by Masaru Ibuka and Akio Moriwa in a department store warehouse in Nihonbashi, Tokyo in October 1945. In its 73-year history, Sony has gone through six generations and seven leaders. The consumer electronics giant, once synonymous with innovation and durability, has also fallen from its peak to the bottom.

As Japan's domestic economy gradually recovered from its devastation after its defeat in the war, the Tokyo Telecommunications Research Institute was renamed Sony, and it successively launched a number of groundbreaking products that led the world trend, including the world's first semiconductor radio, the world's first home video recorder, the Walkman portable player, the Trinitron TV, as well as products such as the PlayStation game console and CMOS image sensors that still dominate the market today.

Under the leadership of the three leaders of the first two generations, Sony spent the first half of the last century and was successfully listed in New York in 1970.

In 2000, Sony was 55 years old, and its market value once reached its peak of 138 billion US dollars. But after the peak, Sony immediately fell sharply. In 2003, Sony's profits dropped by 98%, and the loss reached 1 billion US dollars. This was just the beginning of the fall. By 2012, Sony's market value had shrunk to a mere 17 billion US dollars, and the huge empire was left with only an empty shell.

The glory has become a thing of the past, but the decline has become the nightmare of every CEO since 2000. After just five or six years in office, each CEO has retired with gray hair. It was not until 2012 when Kazuo Hirai took office that Sony recovered through a series of business cuts and adjustments and integrations and got back on track.

During Sony's decline, 20th Century's main business of electronic products became a burden for Sony. The main business of television alone suffered a huge net loss of US$926 million in the fourth quarter of fiscal 2002.

Although Sony's electronics business had already entered a loss-making state in the early 2000s, its mobile phone business still maintained strong vitality at this time.

Sony Ericsson was almost synonymous with first-class photography and music quality at the time. When many mobile phones were still stuck in brick-like design and brick-like performance, Sony had already launched camera phones, and also built-in the filter frame function that is still popular now.

Whether in terms of appearance or performance, Sony was worthy of the trend at the time and led the trend of mobile phones in music, photography and other aspects in the era of feature phones.

But the market changed rapidly and in less than ten years, Sony's mobile phones suffered a complete defeat in terms of performance and market.

Recently, Sony Group released its quarterly financial report, which showed that Sony's second-quarter sales were 218.28 trillion yen (about 19.29 billion US dollars), a year-on-year increase of 6%; net profit was 173 billion yen (about 1.552 billion US dollars), a year-on-year increase of 32%. Both sales and profits exceeded analysts' previous expectations.

Among Sony's eight businesses, semiconductors, film and television, and even the insurance-selling financial business are all profitable. The only exception is the mobile communications business, which alone suffered a loss of $262 million in a single quarter, dragging down the entire group.

Following the release of the financial report, Sony further lowered its year-end sales forecast for its mobile phone business to 100 billion yen (883.7 million U.S. dollars), and its operating income forecast is now 65 billion yen (574.5 million U.S. dollars).

In terms of market share, Sony has also suffered a comprehensive defeat from the global to Asia Pacific to Japan. Sony has repeatedly lowered its forecast for mobile phone sales, from 10 million in March to 9 million in July, and then directly to 7 million this time.

Globally, in July this year, Sony's mobile phone market share in the United States was 0.3%, ranking tenth, and in Europe it was 1.8%, ranking ninth, while in India it simply fell out of the top 22.

There is no need to say more about the Asia-Pacific market. Since the rise of a number of Chinese mobile phone manufacturers such as Huawei, Xiaomi, OPPO, and Vivo after 2009, Sony's market share has long fallen out of the top ten, with its comprehensive suppression from performance to price to localized marketing.

Looking at the sales volume of the Japanese mobile phone market, Apple ranked first with 43.4% of shipments in the Japanese mobile phone market in fiscal 2017, followed by Sharp and then Sony. Previously, Sony's mobile phone sales in Japan still maintained the second market share.

In recent years, the extremely xenophobic Japanese market has gradually shown signs of loosening. Huawei and Xiaomi have already entered Japan for some time, and OPPO also announced its entry into Japan at the beginning of this year.

Sony mobile phones are facing wolves in front and tigers behind, and their last base is about to be lost.

In the AI ​​era, Sony mobile phones have become laggards in protecting sentiment

At the current stage, the competition in the mobile phone market has almost reached a life-and-death situation. In addition to experience and product design, technology has become the new focus of the battle among various companies.

However, when it comes to popular mobile phone technology elements in recent years, such as full screen, "Pinduoduo" camera, AI chip, under-screen fingerprint, and flash charging, Sony has become a unique and alternative player.

We can get a glimpse of this from this year's flagship phone, Xperia XZ2.

Full screen? "Pinduoduo" camera? Good looks? Good photo taking? High memory? Sony has been using its strength and persistence for more than ten years to tell you what it means to be the guardian of feelings.

After the mobile phone design entered the era of full screen and multi-screen, Sony still clung to the original frame and durable craftsmanship and refused to give in. It even went a step further in the three-proof technology launched in 2012, becoming the unshakable king in this field so far.

In terms of photography, Sony, which has the most powerful CMOS image sensor and lens, is not as radical as people think. The 19-megapixel rear camera and 5-megapixel front camera configuration that it still insists on are in line with the rigidity and seriousness of the Yamato people. Many consumers even complained that Sony's camera algorithm is not worthy of its hardware foundation, and in terms of imaging, it does not meet people's special requirements for selfies, long-range or macro photography.

Sony also seems a bit conservative in terms of RAM. In the 2018 flagship Xperia XZ2, Sony was persistent and only equipped its flagship phone with 6GB of RAM for the first time, even though many other competitors had already equipped their phones with 8GB. In 2017, Sony's annual flagship phone, the Xperia XZs, was the first to be equipped with 4GB of RAM.

How many opportunities does 5G bring to Sony?

Technological conservatism has led to a decline in sales and loss of market share, but it seems that Sony has had no intention of selling its mobile phone business for many years.

Both former CEO Kazuo Hirai, who just stepped down in April this year, and Kenichiro Yoshida, who just took office, said in unison: Sony has never thought of giving up its mobile phone business. The current Sony will focus on camera functions to enhance the competitiveness of its products, and in the future Sony will seize the opportunity of the next change to make a complete turnaround.

This opportunity refers to 5G.

There is no denying that the arrival of the 5G era may bring about a major reshuffle in the mobile phone industry.

During the rise and fall of 2G, 3G, and 4G, and the rise of smartphones, a large number of giants fell and a large number of companies rose. Giants such as Nokia, Motorola, and Sony fell in this process, while domestic brands such as Huawei, Xiaomi, and OV rose with the popularity of 3G and smartphones.

So what are the chances of Sony turning around in 5G?

As the 5G trend continues to heat up, a number of manufacturers have launched their own new products or concept products based on the concept.

In August, Lenovo released Moto Z3, and OPPO, Huawei, and vivo also announced that they will launch 5G mobile phones next year.

However, Sony has recently officially confirmed that its flagship Xperia XZ3 will not support 5G. In other words, Sony will be at least one to two years behind mainstream manufacturers in terms of 5G products.

Now that we have lost our first-mover advantage, is it feasible to gain some advantage by setting standards?

Currently, Huawei Polar has become the coding scheme for uplink and downlink control channels, while the uplink and downlink short code schemes for data channels belong to Qualcomm LDPC codes. Sony's technology accumulation in the communications industry is not superior.

Taking a step back, if technology, local conditions and standards are not advantageous, then perhaps another chance may be possible through ecosystem building, high quality and low prices, and channel marketing.

Let’s talk about the product ecosystem first. Huawei, Xiaomi, Apple, and Samsung have spared no effort to expand their product portfolio beyond the development of mobile phones and build a huge empire.

In terms of cloud services, Apple, Huawei, Xiaomi and others have established their own cloud deployments. The construction of a software application ecosystem and the creation of localized services are all ways for smartphone manufacturers to build a stronger product and service ecosystem, and even extend to the layout of surrounding IoT products. Sony's deployment is also not active.

Then there is the hardware ecosystem. In recent years, Apple has continuously abandoned suppliers and developed its own GPU, AI chips and power management chips to enter the closed loop of self-production and self-sales. Huawei has also continued to increase its investment in chip research and development to shorten the length of the industrial chain. However, Sony, except for lenses and camera CMOS, has few core barriers in the mobile phone industry chain.

Faced with such a market situation, it is obvious that Sony's mobile phone business has no time to expand its business.

Weak price competitiveness is also a reality that SONY has to face in the face of its current competitors. This year, Sony launched the Xperia XZ2 phone, which has a square design, no full screen, and no multi-cameras. The price on JD.com is 3699 yuan. The Huawei P 20 Pro in the same period is priced at 3388. In terms of functions and publicity gimmicks, the latter is showing a trend of comprehensive suppression.

Finally, let’s talk about channels. When Xiaomi, OV, Huawei, etc. invited popular young actors or actors such as Wu Yifan, Lu Han, and Hu Ge to endorse their products, Sony only had the words “Sony is great” echoing among the folk brand fans. However, selling feelings will not win the 5G market, and the enthusiasm of fans will gradually fall through in the expectation again and again.

Sony, which is good at selling big, has already marginalized mobile phones.

While Sony says it will never sell its mobile phone business, it is gradually marginalizing mobile phones within the company.

Since Kazuo Hirai took office in 2012, Sony has begun to downgrade consumer electronics products and adjusted the three major business segments of digital imaging, games and audio-visual entertainment into core businesses. The mobile phone business has been on the margins for a long time.

On the other hand, Sony's mobile phone division is also facing the fate of continuous layoffs. Once the company's top management intends to lay off employees and marginalize business, employees will respond with reduced creativity and enthusiasm.

In 2014, Sony Mobile laid off nearly 800 employees in China, causing huge market controversy.

In 2015, Sony Mobile announced that it would lay off about 2,100 employees worldwide, reducing its workforce to about 5,000. Then, Sony Mobile laid off 1,000 employees in Sweden, accounting for nearly half of its total employees.

In May this year, Sony announced that it would reduce the size of its Xperia business unit to save operating costs and focus its main efforts on high-end flagship devices, while some mid- and low-end device product lines might be cut.

With the marginalization of business and reduction of expenditure, the mobile phone business has become a piece of chicken ribs for Sony.

Looking at Sony's history, it is not difficult to find that selling off is almost commonplace for Sony.

In 2012, when Kazuo Hirai took office, Sony had become a mess with a market value of only $17 billion, four consecutive years of losses, and a 24-year low in stock prices. The position of Sony CEO also became a hot potato, and if he was not careful, he would have to bear all the responsibilities for Sony's bankruptcy.

So how to pick up this fallen giant? Kazuo Hirai's choice was to adjust the business and streamline operations.

Where does the money come from for business adjustments? The answer given by Kazuo Hirai is "big sale".

From selling buildings to selling blinds, from selling businesses to selling companies.

Sony, during Kazuo Hirai's tenure, thoroughly implemented the joke that top-notch companies sell their buildings.

According to records, Sony sold its US headquarters building for $770 million in 2012, sold the NBF Osaki Building in Tokyo's Shinagawa district for $1.2 billion in 2013, and sold Sony City, the Sony headquarters building in Tokyo, for $490 million in 2014. In 2017, Sony simply sold "construction waste" - cut shutters from the old headquarters - based on sentiment.

By selling buildings and increasing layoffs, Sony turned a profit in the first fiscal year of Kazuo Hirai's tenure, from a net loss of 456.7 billion yen (about 5.7 billion US dollars) to a profit of 43 billion yen (about 458 million US dollars).

However, the number of buildings was limited, and layoffs were not a long-term solution. So, Kazuo Hirai started planning to dissolve the business and sell the company.

• In 2012, Sony sold its subsidiary Sony Chemical & Information Devices Corporation to the Development Bank of Japan for 40 billion yen.
• In 2013, Sony disbanded its optical drive division.
• In 2014, Sony sold its VAIO PC business to the Japan Industrial Investment Fund (this product once made Steve Jobs worship it).

Of course, a big sale cannot save Sony. Hirai Kazuo's real intention is to quickly raise funds by selling buildings and companies to streamline and revitalize the business.

With this philosophy in mind, Sony's gaming, finance and semiconductors immediately stood out.

As of April 2018, when Kazuo Hirai stepped down, Sony Group's turnover in the previous fiscal year was 8.544 trillion yen, a year-on-year increase of 12.4%; operating profit was 734.9 billion yen, a year-on-year increase of 154.5%, setting a record high. Among them, games, semiconductors and financial businesses became the mainstream of profits. However, the mobile communications business is still unprofitable, which has become a great regret for Kazuo Hirai.

According to Sony's usual style, there is no doubt that it will announce the sale of its mobile phone business or even dissolve its mobile division one day. After all, Sony, which has rich experience in selling companies, has already put its mobile phone business on the brink, and selling it is only a matter of time.

Fujitsu has also set a precedent for Sony in selling its mobile phone business. In January this year, Fujitsu said it would sell its mobile phone business to Polaris Capital Group for 50 billion yen (about 456 million U.S. dollars).

Conclusion: Japanese mobile phones are in decline, and selling them may help Sony and ZTE

Looking at the gradual decline of Sony's mobile phones, it has its own factors, but it is also closely related to the times.

As the manufacturing industry gradually shifted to developing countries, the competitive advantage of Japanese mobile phones as a whole decreased, and Sony Electronics also declined in sync with the decline of Japanese mobile phones as a whole.

Since the beginning of the century, the competitiveness of Japanese electronics has been declining. Panasonic, Sony, Toshiba, NEC, and Fujitsu have gradually gone downhill, and the rising Korean electronics, represented by Samsung and LG, have quickly swept the world. In recent years, the competitiveness of Korean electronics has gradually followed the old path of Japanese electronics, and China has taken the opportunity to rise.

For Sony, abandoning the mobile phone business is not a pity. Every large enterprise and its business has its life cycle and social significance. With the transition of the manufacturing industry, the social significance of Sony and its mobile phone business in the previous stage has ended, and its previous life cycle has also ended.

At the turning point of a new life, Sony, which has experienced ups and downs and is already 73 years old, is now ready to turn its attention to mobile phones.