Sony’s fresh innovation supplies Apple, Samsung phones

Sony’s latest star performer is a chip found in almost every high-end camera and smartphone. Apple’s iPhones 5 and 4S use the chip and so do Samsung’s flagship Galaxy S4 and LG’s G2, according to researchers.

The company grabbed almost a third of the $7.6 billion market for low-power sensors that record crisp snapshots. Sony boosted its revenue from the chips by about 30% last year as Chief Executive Officer Kazuo Hirai tries to revive the electronics unit after its TV business posted nine straight annual losses.

“Sony is making a clean sweep of rising demand,” said Yasuo Nakane, an analyst with Deutsche Bank AG in Tokyo. “These are distinguished products the company spent three decades developing.”

Most of the 10.9 billion yen ($111 million) operating profit last quarter from Sony’s device division was generated by sales of the chips, Deutsche Bank estimates. Global shipments of the imaging sensor will probably grow by a quarter to 3.14 billion units this year, according to Techno Systems Research Co. in Tokyo.

The company has spent 220 billion yen since 2010 to boost production capacity of the chips at its two plants on Japan’s southern Kyushu island. It has another image-sensor facility in Thailand. Sony garnered 32% of the imaging-sensor market revenue in 2012, according to Techno Systems. Santa Clara, California-based Omnivision Technologies Inc. ranked second with 14.4%, followed by Samsung at 12.9%.

Slowing demand for high-end handsets, the most-profitable segment of the mobile-phone market, may pressure Sony to cut prices for its sensors, said to Bloomberg Ryosuke Katsura, an analyst at UBS in Tokyo. Global smartphone revenue will gain 22% in 2013, narrower than the 41% seen for annual shipment unit volumes, due to falling prices, UBS estimates.
Sony probably will continue selling the chip to rivals to boost profits and keep factories working at capacity as smartphone competition intensifies, Katsura said.

Yoshinori Hashitani, a Sony vice president, said during an Aug. 1 earnings call there was “a significant increase in sales of image sensors for mobile products.” When Hirai took over in April 2012, he said he planned to win back customers by concentrating on mobile devices, games and digital imaging, which includes sensors.

The company’s image-sensor division gained an advantage against competitors after switching in 2004 to a technology known as complementary metal-oxide semiconductors, or CMOS. Sony bet it could improve the technology, which at the time couldnt match the picture quality offered by other chips.

Sony shares jumped more than 117% since August 2012 in Tokyo trading.