Sony makes money quietly by selling components to increase company profits

June 10: Tens of millions of consumers around the world have bought small, high-tech portable cameras made by Sony since late last year, but they don't know it.

These cameras, which use sophisticated image sensors, are used in Apple's latest smartphones, the iPhone 6 and 6 Plus, as well as some models of Samsung smartphones.

The hot sales of sensors have greatly boosted the sales and profits of Sony's device division. The product has also become Sony's new strategic trump card, helping the Japanese electronics giant, which has been in a long-term loss-making situation, to regain financial health.

Sony, once a dominant player in its market with iconic products like the Trinitron TV and the Walkman, no longer insists on putting its stamp on every product or making money-losing products to gain a reputation. Now, Sony's top priority is to turn a profit.

According to a senior Sony executive, this change in perception represents an important shift in the company's corporate culture.

In the past, when facing fierce competition, Sony generally maintained its market share by cutting prices, even at the expense of profit margins. Now, the company's management is focused on increasing net profits, even sacrificing some market share is acceptable.

In line with this idea, Sony sold its Vaio-branded PC business last year and spun off its TV business into a wholly owned subsidiary. Sony is laying off more than a third of its employees at its corporate headquarters in Tokyo, and will also cut 20% of its global sales team.

Sony's core electronics business suffered losses for many years, causing Moody's, an international credit rating agency, to downgrade its credit rating to junk level in January last year. Since then, Sony has taken the above series of self-help measures.

So far, investors have welcomed Sony's new strategy. Sony's shares have nearly doubled in the past year on the New York Stock Exchange. They have risen another 10 percent since the company announced its three-year restructuring plan in February. Investors in Japan are even more bullish on Sony's future, with its shares on the Tokyo Stock Exchange more than doubling in the past year and up 20 percent since February.

However, some analysts remain cautious, believing it is too early to declare Sony a turnaround. Sea-Jin Chang, a business professor at the National University of Singapore and author of the book "Sony vs. Samsung," said: "Sony didn't have a better strategy in the past and probably still doesn't have one now. The company's recent improvement in financial conditions is due to the weakening of the yen, not corporate restructuring."

Sony's overall sales rose 5.8% to $68.5 billion in the fiscal year ending March 2015, but its losses reached $1.05 billion.

“Sony is in a multi-year recovery, in my view,” said Atul Goyal, an analyst at Jefferies Group in Singapore.

This is not the first time Sony has tried to "stop the bleeding." The company proposed a three-year restructuring plan in 2012, but failed to achieve major sales targets and financial indicators. Sony CEO Kazuo Hirai attributed the failure to "a lack of sufficient understanding of the competitive landscape."

“Our previous business plan relied too much on solving problems by increasing the scale of each business,” Hirai said in February when he announced a new three-year plan.

While Sony made its name in consumer electronics with groundbreaking products such as the Walkman portable player and the PlayStation video game console, in recent years the company has made most of its profits from entertainment and, to a lesser extent, financial services.

Sony's insurance and banking businesses, for example, generated $1.61 billion in operating profit last year, while its music and movie businesses generated a combined $979 million in profits, even after accounting for the $41 million it spent to quell a cyberattack in November.

Sony's once-mighty TV, audio and video businesses made $167 million in profit last year, while its mobile communications division lost $1.84 billion, including $1.47 billion in asset write-downs.

Sony's new plan places more hope on the development of its image sensor business. The major difference from the past is that image sensors are no longer limited to Sony's own brand products.

Supplying external customers such as Apple enabled Sony's device division to generate revenue of $7.98 billion and operating profit of $776 million last year, and profits are expected to grow to $1.01 billion next year.

Sony also recently formed a joint venture with Olympus to produce medical equipment that will use the company's advanced image sensors, which Sony says are at least two years ahead of its competitors.

To meet market demand, Sony plans to spend $1.75 billion this year to increase production capacity.

The launch of this new strategy does not mean that Sony will completely abandon the development of independent consumer electronics products. Sony's counter in Ginza, Tokyo also displays its smart LED bulb speaker. This LED bulb can change the brightness and color of the bulb through a mobile phone, and thanks to its built-in speaker, consumers can also play music through the mobile phone Bluetooth.

The bulb also features Sony's logo, at least for now.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.