Friday, February 01, 2019

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.
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12 comments:

  1. Albert Theuwissen - Harvest ImagingFebruary 2, 2019 at 11:14 AM

    I am not a marketing guy, and that is probably the reason I do not understand this. On one hand the sales of mobile phones is going down, but on the other hand, smart phones have 2, 3, 4 and even 5 cameras. Are these extra numbers of smart phone cameras not enough to compensate for the loss in mobile phone sales ?

    ReplyDelete
    Replies
    1. There are few factors:

      1. Apple, Sony's largest customer, reports lower sales.
      2. Samsung and other companies capture a larger chunk of Chinese smartphone market. Indeed, as pixel quality approaches to the theoretical limits, it's just a matter of time till other companies close a performance gap with Sony.
      3. While dual cameras became common, triple and quad cameras are still a small part of the market. Also, in many cases the second camera is used just for bokeh and its resolution is lower - means less money for image sensor companies.
      4. In the longer term, dual screen and flexible screen phones might eliminate the need for selfie cameras. If this happens, the sales of image sensor crash.

      Mobile phones have been the main driver for image sensor industry for the last 20 years. Being such a large market, it attracted a lot of investment that propelled CIS technology very close to perfection. Unfortunately, nothing lasts forever. Sony, like everybody else, needs to find a new growth driver now.

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    2. One comment: Samsung was reported to have only 0.8% share of Chinese smartphone market in the Q1 2018. It is certain not a good player in China.
      Ref: http://www.sohu.com/a/235620042_632979

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    3. 0.8% share is just for Samsung-branded phones. As for Samsung image sensors, they are used in many phones made by other companies.

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  2. Very clear and good analysis Vladimir: you should work for market research company YOLE DEVELOPPEMENT ;)

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  3. When will we see quantum dot color filters in Sony's image sensors?

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    Replies
    1. for which B$ potential application? Do you see any? That is the question...

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    2. probably for some application that deals with IR? I think for example the SWIR vision approach to use quantum dot filters to generate some sensitivity in the 1400nm range on top of a silicon CIS quite interesting. could be that some applications like face id work have a benefit from higher wavelenghts?

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  4. Yeah, the next is TOF

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  5. Hello Vladimir, great analysis, you are going to put us out of business 
    let me comment a little on top of it, just for the pleasure of controversy

    1. Apple, Sony's largest customer, reports lower sales.

    Sony owns 50% of the Smartphone CIS market and Apple only 15% of Smartphones, so I would say it is both Apple and China. To answer to Albert, and from the Yole numbers, smartphone camera volume still increased by 1.7% in 2018.

    2. Samsung and other companies capture a larger chunk of Chinese smartphone market.

    I fully agree, this is a big news from this early 2019, sensors from Samsung and Omnivision are currently taking some market share from Sony. Remember also that the 3rd camera of the iPhone XS/XR are using ST Microelectronics chip, this is part of market growth Sony does not currently capture, most competitor are using Omnivision, so again no growth for Sony there. Hopefully they may get the slot for rear ToF camera in 2020.

    3. While dual cameras became common, triple and quad cameras are still a small part of the market. Also, in many cases the second camera is used just for bokeh and its resolution is lower - means less money for image sensor companies.

    Difficult to answer to this one, from my numbers I still see the dominant trend being the rise in resolution of the front (selfie) camera therefore ASP is rather going up, while volume stagnates, this mean overall revenues have grown in the range of 5% in 2018.

    4. In the longer term, dual screen and flexible screen phones might eliminate the need for selfie cameras. If this happens, the sales of image sensor crash.

    The borderless /dual screen is a risk but I would not call for an overnight crash. The smartphone market is huge and mature, doubling the cost of screens is probably more difficult than doubling the cost of cameras for now.

    Pierre Cambou – Yole Developpment

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  6. "The borderless /dual screen is a risk but I would not call for an overnight crash. The smartphone market is huge and mature, doubling the cost of screens is probably more difficult than doubling the cost of cameras for now."
    Right, some costing analysis indicates the iPhone screens around 80US, and the Selfie camera around 15US. But it might be a closer call than you think. For the visor when picture taking you might not need such a expensive display, and if full triple camera solutions with 40Meg resolution are considered camera cost may go beyond 40US / side. Still I agree it will not happen over night because we have to get used to it and you can not take the cheapest displays as in low cost DSLR vizors on a high end phone, but cost wise we might be closer than one can think.

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