Sony Reports Lower Image Sensor Sales, Reduces Forecast

Sony quarterly earnings report reveals 8% YoY lower image sensor sales siting lower mobile image sensor demand. The next fiscal year forecast is reduced by 6%:

• FY18 Q3 sales decreased 8% year-on-year to 230.3 billion yen, primarily due to a decrease in unit sales of image sensors for mobile devices.
• Operating income decreased 14.0 billion yen year-on-year to 46.5 billion yen.
• We have downwardly revised our FY18 sales forecast to 870 billion yen and operating income to 130 billion yen.
• This downward revision is primarily due to a reduction in the unit sales forecast for image sensors resulting from a deterioration in the smartphone market.
• Although we expect the difficult market environment for smartphones to continue going forward, we are seeing high-end sensors adopted in both highend and mid-range models as smartphone makers seek to differentiate their products through camera functionality.
• Consequently, there is no change to our view that demand for the high-end image sensors that Sony excels at making will continue to increase due to the trend toward multi-lens cameras and larger die-sizes. There is also no change to the plan I recently outlined to increase our production capacity to nearly the maximum that can fit into our existing facilities.

SeekingAlpha publishes the earnings call transcript with few more details on Sony expectations from the 2019 business:

"So the third quarter rate of operation of the semiconductors as well as what's our view on the first half of fiscal '19. Currently for the third quarter fiscal '18 the wafers on an average 99,000, 99K and this is along the line of October forecast. In the fourth quarter of fiscal '18, wafer injection number is on an average 89K. And for fiscal 2019, it is very difficult to cite a specific number, so I like to communicate to you basic way of thinking.

So the smartphone market units for fiscal '19, it is expected to foresee any growth, probably the unit sales would decline. That is the forecast held up by most of the market related people. But on the other end multi-lens cameras as well as a large size imagers that's the trend which will be accelerated further over our October forecast throughout fiscal 2019, so those are both positive and negative factors for us.

So how we forecast the outcome of that? In any case as far as fiscal '19 is concerned, the market condition will be very tough. So we would like to be conservative and carefully manage the business in a steadfast manner.

In case of Semiconductor basically, the demand immediately around us is weakened. As you know, our image sensors takes about five months from the introduction of wafer to shipment that lead time five months. Therefore the level of inventory at the end of December in 2018 was a little heavy even in view of the smartphone shipment in 2019. And we are taking measures to adjust the inventory to the appropriate level but towards the year-end, in view of the immediate situation, inventory level appears to be a little heavier."