Sony IR Day 2018
May 22, 2018 Sony Corporation
Game & Network Services（G&NS） 3
Music（SME） 20
Music（SMEJ） 31
Pictures 48
Imaging Products & Solutions（IP&S） 68 Mobile Communication（MC）
Operation & Sales Platform 98 Home Entertainment & Sound（HE&S）
Semiconductors 115 Sony IR Day 2018
Game & Network Services Segment
May 22, 2018
John (Tsuyoshi) Kodera
Business Executive, Sony Corporation President & CEO, Sony Interactive Entertainment
Agenda Game & Network Services Segment
1. FY2017 Review
2. Strategy from FY2018
Sony IR Day 2018 3 Game & Network Services Segment
1. FY2017 Review
Sony IR Day 2018 4
FY2017 Key Achievements Game & Network Services Segment
Further expand Enhance game line-up Grow PlayStation®Plus PlayStation® user base paid subscribers
PlayStation®Plus paid subscribers
34.2M
26.4M
PlayStation®4 20.8M 79M units cumulative sales as of Mar 31 2018 PlayStation™Network 80M+ MAU As of Mar 31 2018 PS4 Game Play 246M games sold E/FY15 E/FY16 E/FY17 800M hrs+/week FY2017 PS4 software unit sales As of final week of Dec 2017
Sony IR Day 2018 5 Challenges and improvements Game & Network Services Segment
PlayStation®VR PlayStation™Vue ForwardWorks
VR market growth Market & future business Delays in title development below expectation model remains uncertain Still in investment phase
Improvements required in spite of steady growth Utilizing these businesses to strengthen user engagement is key
Sony IR Day 2018 6
FY2017 Operating Profit Variation from FY2016 Game & Network Services Segment
(Bil yen)
Sales revenue +18% 1,649.8 1,943.8 ① Profit improvement from hardware cost down etc.
177.5 ② Profit growth from software sales and add-on contents Operating income including network 135.6 ③ ④ ⑤ ① ② ③ Network services growth mainly with PS Plus paid subscribers
④ Increase in SGA to support network sales growth and R&D
⑤ Impact of exchange rates*1 FY2016 FY2017 Act Act
*1: Impact of foreign exchange fluctuations is calculated using the sales and costs denominated in each currency in FY2017 and comparing them with the previous fiscal year
Sony IR Day 2018 7 Game & Network Services Segment
2. Strategy from FY2018
Sony IR Day 2018 8
Strategy from FY2018 Game & Network Services Segment
Enrich and utilize Leverage install base Grow and improve exclusive titles and active user recurring revenue
PS4 cumulative install base
FY13 FY14 FY15 FY16 FY17
Sony IR Day 2018 9 Strengthen user engagement Game & Network Services Segment
User engagement
Balanced game portfolio eSports
F2P
Variety of game models Improve PS VR user experience
Enhance data analytics IP Franchise PS Vue
Sony IR Day 2018 10
The virtuous cycle of PlayStation Game & Network Services Segment
Strengthen IP リカーリング収益の更 Exclusivity OUTCOMEなる成長と進化 Utilize catalog MAU
Platform of PS Plus Retention Choice
Enrich membership Rich features Grow revenue Attractive services Cash Conversion Cycle
Cash Flow Improve Ecosystem ２５ Expand user base Increase playtime
Sony IR Day 2018 11 Mitigate the impact of platform lifecycle Game & Network Services Segment
(Bil yen) 190 • Aim to mitigate the impact of O.P. trend platform lifecycle compared to the (FY1993〜2018) past cycle and stabilize profit structure.
• Generate cash flow by effectively utilizing 1 trillion yen network business.
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Free Cash flow trend (FY2013〜2017)
5 years cumulative 700 Bil-yen+ PlayStation® PlayStation®2 PlayStation®4 launch launch launch
PlayStation®3 launch
Sony IR Day 2018 12
FY2018 Operating Profit Variation from FY2017 Game & Network Services Segment
(Bil yen)
Sales revenue 1,943.8 1,900 ① Hardware unit sales decline and cost increase
Operating income 190 ② Profit growth from game software sales and add-on 177.5 contents growth including network ③ ④ ⑤ ③ Network services growth mainly with PS Plus paid subscribers ① ② ④ Increase in R&D and SGA etc.
⑤ Impact of exchange rates*1
FY2017 FY2018 Act Apr Fct
*1: Impact of foreign exchange fluctuations is calculated using the sales and costs denominated in each currency in FY2018 and comparing them with the previous fiscal year.
Sony IR Day 2018 13 FY2020 Target Game & Network Services Segment
Sales revenue (For Reference) 1,800 Bil-yen
Operating Profit 130〜170 Bil-yen O.P trend (FY1993〜2018, FY2020 Target) (Bil-yen) 190 170
130
Sony IR Day 2018 14
1994 We were aiming 1M units. From now We are aiming 100M MAU.
Sony IR Day 2018 Sony IR Day 2018
Music Segment
May 22, 2018
Sony Music Business Overview Music Segment
(Equity Method) Sony Music Sony Music Sony/ATV EMI Music Publishing (“EMI”) Entertainment (“SME”) Entertainment Japan (“SMEJ”) Music Publishing (“S/ATV”)
Outside Sales (FYE18 ACT)
Visual Media & Platform: 34%
SMEJ: Recorded Music: 57%
SME: SME:
Music Publishing: 9% SMEJ:
Sony IR Day 2018 17 FYE21 Financial Target Music Segment
Operating Income: 110~130 billion yen
※ Sales Amount (For Reference): 800 billion yen
Sony IR Day 2018 18
Sony IR Day 2018
Music Segment (SME)
May 22, 2018
Business Executive Sony Corporation
Chief Executive Officer Chief Operating Officer Sony Music Entertainment Sony Music Entertainment Rob Stringer Kevin Kelleher Sony Music FYE18 Achievements and Highlights
Strong Financial Year over Year Operating Cash Operating Revenue Results increases in: Income Flow Margin
A Global Leader 25.1% #2 Market Share Global Music Company
Stronger Growth Streaming Global Market Digital Video Total Market (ex Japan) +44% +42% +10.5%
Sony IR Day 2018 20
Strong Repertoire Performance
Beautiful Trauma Something Just Like This
P!nk Chainsmokers 21 Savage Camila Cabello
Human Closer
Rag’n’Bone Man Chainsmokers Childish Gambino Kane Brown
Harry Styles
I’m The One Harry Styles DJ Khaled Maluma Khalid Sony IR Day 2018 21 Evolution of Streaming Landscape
Strategies: 1 Drive Paid Subscription Around the World 2 Increase Revenue Per User Transition Established and Healthy Competition and Modernize Product and Open Developing Markets to Consumer Choice Plan Offerings Paid Subscription
Established Create greater differentiation between paid and free tiers
Construct new product
SELL configurations and content to up- unlimited sell subscribers Developing Expand the use of voice, a driver of music consumption in the home and soon in the car
Launch pre-pay subscription options for developing markets
CURRENT FOCUS LONG-TERM FOCUS Sony IR Day 2018 22
Strategic Investment In The Orchard
MUSIC VIDEO
TECH DISTRIBUTION
Sony IR Day 2018 23 World Class Analytics Capabilities Talent Discovery Targeted Breaking Hits Marketing and Analytics in Promotion the Creative Digging Predictive Process Deeper To Analytics = Find Talent Measured Earlier Risk Taking
Optimizing Revenue Strengthening Artist Relationships
Marketing ROI Increasingly Transparency Measurable Advanced in Payments Real Time Partner Sales Analytics Reporting
Sony IR Day 2018 24
Creative, Artist-Centric Approach
Increase Creative Workforce
Creativity Streaming Artist & Genre Relationships Musical Focus Instinct
Creative & Business Services
Sony IR Day 2018 25 Human Resources Focus
Sony IR Day 2018 26
Recorded Music Market Profile ($ in billions; excludes Japan)
Three years of solid market growth Expect market growth in 2018 Streaming Streaming growth more than offsetting declines in physical and download markets Streaming represents 45% of total market: Continued rapid growth of streaming, reaching Other Digital 54% of total market - Paid subscription revenue up 50% year over year Greater download and physical declines Physical - 176 million premium paid subscribers Public Performance / Sync +10.5% +4.1% $15.1 +9.1% $14.5 -2.6% +4.0% -35% $13.2 Downloads $11.6 $12.1 $1.9 $2.7 $4.5 $6.5 $8.2 +29% 16% of 45% of Audio Streaming Total 23% of 34% of 54% of Total Total Market Total Total Market Market Market Market $3.9 $3.6 +15% $3.2 $2.7 Video $2.1 $4.0 $3.8 $3.4 $3.2 $2.6
$1.8 $2.0 $2.1 $2.1 $2.2 CY14A CY15A CY16A CY17A CY18 Est Healthy industry performance overall supports SME growth
Source: IFPI Sony IR Day 2018 27 Note: Digital Figures Include Digital Radio (SoundExchange) Sony Music Operating Income: FYE17 Act FYE18 Act (US Dollars)
2 3 1 Physical & Download
2 Streaming
3 All Other (Investments, SG&A) 1
FYE17 Act FYE18 Act
Sony IR Day 2018 28
Sony Music Operating Income: FYE18 Act FYE19 Forecast (US Dollars)
Physical & Download 2 3 1
2 Streaming 1 3 FX / All Other (Investments, SG&A)
FYE18 Act FYE19 Forecast
Sony IR Day 2018 29 Sony IR Day 2018
Music Segment (SMEJ)
May 22, 2018
Business Executive Sony Corporation
Representative Director Director of Board Chief Executive Officer CFO, Corporate EVP Sony Music Entertainment (Japan) Inc. Sony Music Entertainment (Japan) Inc. Michinori Mizuno Toshihiro Konno
Agenda Music Segment (SMEJ)
１．Business Outline
２．Mid-Term Vision
３．FY17 Results / FY18 Forecast
Sony IR Day 2018 31 1. Business Outline
Sony Corporation InvestorSony IR RelationsDay 2018 3232
Company Profile Music Segment (SMEJ)
Name: Sony Music Entertainment (Japan) Inc. Established: March, 1968 Location: 4-5 Rokubancho, Chiyoda-ku, Tokyo Representative Director: Michinori Mizuno Number of Subsidiaries: Approximately 20
Revenue Breakdown Music Other Physical
Digital Artist Management FY17 Music Publishing Anime
Mobile Game
Sony IR Day 2018 33 50 Year Journey 〜 Business Diversity Starting from CBS/Sony 〜 Music Segment (SMEJ)
Strengthen Music Business by Vertical Integration Diversify Business by Horizontal Expansion 1968 Est. CBS/Sony Records Inc. ʼ97 began consignment sales for other companies Began publishing business Began music distribution business Music Biz ʼ75 began record warehouse Built record / logistics business ʼ87 in-house jacket design factory ʼ78 built recording studios Began Zepp operations ʼ17 first overseas Zepp Package Solution Biz Live Solutions Biz Artist / Talent management Managed comedian talent Voice actor management Talent Managem ent Biz ʻ97 est. SPE VISUAL WORKS Began distribution of Fate/Grand Order Anime Biz Production Studio Mobile ʼ03 changed name App to Aniplex, increased Game investment Global Biz Distributi ʻ78 est. Sony Creative Products on ʼ05 est. US-based company Character Biz Sony IR Day 2018 34
Business Model Music Segment (SMEJ)
Digital Real
Content Artists, songs, recorded music, anime, video, mobile game, characters, etc.
Live
Sony IR Day 2018 35 2. Mid-Term Vision
Sony Corporation InvestorSony IR RelationsDay 2018 3636
Mid-term Vision Music Segment (SMEJ)
Road to General Entertainment Company
◆ Creating and Maximizing Hits ✓ Strengthen music and anime IP ✓ Leverage IP
Sony IR Day 2018 37 Creating and Maximizing Hits 〜 Strengthen Music and Anime IPMusic 〜 Segment (SMEJ)
© 2018 Peanuts Worldwide LLC
©2016 川原 礫／ＫＡＤＯＫＡＷＡ アスキー・メディアワークス刊／ SAO MOVIE Project
Sony IR Day 2018 38
Creating and Maximizing Hits 〜 Leverage IP 〜 Music Segment (SMEJ)
Expand Business Domain Theatrical Mobile Game (Example: Fate Series)
TV Broadcast
©TYPE-MOON / FGO PROJECT ©TYPE-MOON・ufotable・FSNPC
©TYPE-MOON/Marvelous, Aniplex, Notes, SHAFT IP Event
Music Visual Package Media
Sony IR Day 2018 39 Creating and Maximizing Hits 〜 Leverage IP 〜 Music Segment (SMEJ)
Sustainable Growth in Mobile Game Business
✔ Fate/Grand Order Retention Initiatives ✔ New Hit IP-Based Products
ⓒ乃⽊坂46LLC
©Magica Quartet/Aniplex・Magia Record Partners ©Seed&Flower LLC/Y&N Brothers Inc. ©enish,Inc.
©TYPE-MOON / FGO PROJECT
Sony IR Day 2018 40
Mid-term Vision Music Segment (SMEJ)
Road to General Entertainment Company
◆Overseas Expansion
◆ New Businesses
Sony IR Day 2018 41 Overseas Expansion - countries/regions Music Segment (SMEJ)
France China (Shanghai) US (LA) Based Company Germany Representative Office
Live Venues in Asia
New Taipei
Singapore
Kuala Lumpur Australia
Sony IR Day 2018 42
New Businesses Music Segment (SMEJ)
Sports Event
AI VR
©Sony Music Entertainment(Japan)Inc. ©Intelligent Machines Amazes You Inc. ©Aisii Inc.
Sony IR Day 2018 43 3. FY17 Results / FY18 Forecast
Sony Corporation InvestorSony IR RelationsDay 2018 4444
FY17 Operating Profit Variance from FY16 Music Segment (SMEJ)
Gain on Sale of Real Estate Music/ Other Mobile Anime Game
Operating Income
FY16 FY17* FY17 (Excludes One- Time Factor) Sony IR Day 2018 45 FY18 Operating Profit Forecast Variance from FY17 Music Segment (SMEJ)
Mobile Music/ Game Anime Other
Operating Income
FY18 FY17* (Excludes One- Forecast Time Factor) Sony IR Day 2018 46
Sony IR Day 2018
Pictures Segment
May 22, 2018
Business Executive Sony Corporation
Chairman and CEO Sony Pictures Entertainment Inc. Tony Vinciquerra Sony IR DAY 2018 TOKYO
TONY VINCIQUERRA CHAIRMAN & CEO, SONY PICTURES ENTERTAINMENT
48
SPE FYE18 Review REVENUE GREW 10% TO ($ in millions) OVER $9 BILLION; OI GREW +10.1% 34% TO $376 MILLION SALES Increase in Motion Pictures’ OI $8,292 $9,133 1 driven by stronger slate in FYE18 (e.g., Jumanji, Spider‐Man: 1 2 3 4 Homecoming, Baby Driver, Peter $376 Rabbit) compared to prior year In Television Productions, higher 2 $280* licensing revenues for U.S. TV series offset by lower television licensing revenues on catalog product in OPERATING current year INCOME 3 Media Networks had loss from Ten Sports, a newly acquired business
FYE17 Actual FYE18 Actual 4 One‐off charges due to reductions in centralized costs and executive Note: FYE = Fiscal Year Ended (e.g., FYE17 = Fiscal Year Ended March 2017) restructuring Source: Pictures Segment Supplemental Data, March 31, 2018
* FYE17 operating income excludes the $962 million goodwill impairment write‐down 49 50
51 Sony IR DAY 2018 TOKYO
52
“GENUINE CINEMATIC CRAFT AND TECHNIQUE” New York Times
“MOST FUN YOU'LL HAVE AT THE MOVIES ALL SUMMER” Rolling Stones
“PURE MOVIE MAGIC” Associated Press
53 FINDING THE BEST HOME FOR OUR CONTENT
54
55 56
Four Strategic Objectives
CONTROL IP STRENGTHEN GLOBAL FOCUS FINANCIAL LABELS DISCIPLINE
COLUMBIA PICTURES CONSUMER FILM THEME PARKS PRODUCTS TRISTAR PICTURES + LBE SONY PICTURES ANIMATION IP SCREEN GEMS SONY PICTURES CLASSICS AFFIRM FILMS GAMES NEW TECH (VR) SONY PICTURES TV SHOWS INTERNATIONAL PRODUCTIONS
57 TRANSITION “THE RESHAPING THE TIGHTEN “THEATRICALITY” TO DIGITAL OPPORTUNITY ORGANIZATION WINDOWS MARKETING OF URGENCY”
58
59 60
CREATION CONNECTING INNOVATE COLLABORATION EMPOWERING
61 REIMAGINING SPE
62
Sony IR DAY 2018 TOKYO
63 SPE FYE19 Forecast ASSUMPTIONS FOR FYE19: ($ in millions) +0.8% 1 Our current projections for the Motion Pictures’ FYE19 slate are SALES $9,133 $9,210* lower than FYE18’s very high‐ performing slate, and we expect higher unreleased marketing costs 1 2 3 4 ** $400 2 Television Productions is forecasting a $376 reduction in OI based on assumptions regarding several series ending, partially offset by new series launching; also planning for higher development spend OPERATING INCOME Media Networks growth primarily 3 from Ten Sports, GSN and the Latin America region with general growth across most of the rest of the portfolio FYE18 FYE19 Actual Forecast 4 Change to GAAP rules and other Source: Pictures Segment Supplemental Data, March 31, 2018 and SPE Management * FYE19 sales forecast converted at 105 JPY/USD and rounded down to the nearest 10 billion yen to ¥960 billion ** FYE19 Operating Income represents best estimate under new GAAP 64
SPE FYE 21 Financial Target
Revenue: ¥1,050 Billion ($10 Billion) (For Reference)
Operating Income: ¥58 – ¥68 billion ($550 – $650 million) Implied Margin %: 5.5% – 6.5%
*$1 = ¥105
65 66
Sony IR Day 2018
Imaging Products & Solutions Segment Mobile Communications Segment
May 22, 2018 Shigeki Ishizuka
Corporate Executive Officer, Executive Vice President, Officer in charge of Imaging Products & Solutions Business/Mobile Communications Business Sony Corporation
Representative Director and President Sony Imaging Products & Solutions Inc. Imaging Products & Solutions Segment Introduction Mobile Communications Segment Shigeki Ishizuka Corporate Executive Officer, Executive Vice President, Sony Corporation
Imaging Products & Solutions Segment Mobile Communications Segment
Sony Imaging Products & Solutions Inc. Sony Mobile Communications Inc.
Shigeki Ishizuka Mitsuya Kishida Representative Director and President Representative Director and President
Toru Katsumoto Hiroshi Kawano Sony Network Communications Inc. Representative Director and Deputy President Hirokazu Takagaki President and Representative Director
Sony IR Day 2018 68
Imaging Products & Solutions Segment Agenda Mobile Communications Segment
1. Imaging Products & Solutions Segment Ishizuka
2. Mobile Communications Segment Ishizuka/Kishida
3. Reference Materials
Sony IR Day 2018 69 1. Imaging Products & Solutions Segment
Sony Corporation InvestorSony IR RelationsDay 2018 7070
Organization: Sony Imaging Products & Solutions Inc. Imaging Products & Solutions Segment
Digital Imaging Group Professional Solutions and Medical Business FeliCa Services Group Group Business Media Cinema Division ILC Lens Education Peripheral Medical Devices Sports Visual Simulation
DSC Camcorder Professional Products Group Surgical Imaging Devices Life Science Broadcasting Professional Network Display System Camcorder Camera
Imaging Platform: Light to Display Image IP Light Source Lens Image Sensor Display Processingg Transmission
Sony IR Day 2018 71 FY2017 Review Imaging Products & Solutions Segment （bln yen） Sales 579.6 655.9 FY2017 Operating Income (vs FY2016) Operating 74.9 Income 47.3 +27.7 Positive factors
1 Forex impact Increased OPEX Value-Added 2 Recovery from the Kumamoto Earthquakes Recovery (insurance income, sales recovery) from the Forex Earthquakes 3 Increased value-added (shift to higher value- Impact added models)
Negative factors ４ Increase in OPEX（due to increase in sales） FY16 Factor Factor Factor Factor FY17 1 2 3 4 Sales and operating income increased significantly due to the recovery from the Kumamoto Earthquakes and the impact of forex Digital Imaging: continued shift to higher value-added, especially in the interchangeable lens camera space Professional Solutions: new solutions service business offset by decrease in existing business sales
Sony IR Day 2018 72
FY2018 Forecast Imaging Products & Solutions Segment
（bln yen） 660 FY2018 Operating Income (vs FY2017) Sales 655.9 Operating Income 74.9+0.1 75 Red: negative factor Blue: positive factor
1 Forex impact
2 Improvement in value-added Forex Improvement (shift to higher value-added models) impact in Value-Added
FY17 Factor Factor FY18 1 2 April forecast
Sony IR Day 2018 73 Mid-Range Plan: Management Policy Imaging Products & Solutions Segment
Business Foundation ・ Sony brand（B2B&C) Sony Brand（B2B&C) Strengthen products & services under the SONY brand ・ Customerʼs Real-Time Benefit Create customer value with “time” ・ Differentiation by L2D* technology Competitive advantage derived edge from in-house SIPS production technology Strength ＋ Quantitative Target Differentiation by Customer Operating Income Margin: L2D Technology Real-Time Benefit 10% or More
* L2D: Light to Display Sony IR Day 2018 74
Mid-Range Plan: Business Strategy Imaging Products & Solutions Segment
Strengthen and grow the Solutions Business by delivering Real-Time Benefit Solutions Products
Create strong products based on our differentiated L2D*1 technology nology Tech PF PF Light Image Image Lens IP Transmission Display Source Sensor Processing
*1 L2D: Light to Display *2 PF: Platform Sony IR Day 2018 75 FY2020 Financial Targets Imaging Products & Solutions Segment
Operating Income: 85~105 billion yen
※ Sales Amount (For Reference): 700 billion yen
Maximize profit growth and enterprise value Create strong and differentiated products based on L2D technology, deliver Real-Time Benefit, and strengthen and grow the solutions business
Sony IR Day 2018 76
Digital Imaging Business: Mid-Range Initiatives Imaging Products & Solutions Segment Win in an increasingly competitive market and continue to generate high profit Industry Trends Initiatives
Aim to be the top brand in the overall . Revitalization of the mirrorless camera market camera market . Strengthen products, especially in the . Competitors becoming more interchangeable lens camera space aggressive in the market . Engage the professional market . Expand the lens business
Basic Resolution Speed Expand Lens Lineup Expand Pro-Support Worldwide
“Camera of the Year” Camera Grand Prix 2018 Sony IR Day 2018 77 Imaging Products & Solutions Segment Professional Solutions Business: Sales by Business
Media
Sports
Broadcasting System Services & B2B Solutions Education, theater, visual simulation, etc Professional Camcorder
Display Network Camera
Sony IR Day 2018 78
Professional Solutions Business: Mid-Range Growth Targets Imaging Products & Solutions Segment
・ Real-time solutions that leverage IP & cloud ・ Expand in the sports and B2B arena Sales ・ Develop 5G solutions
FY17 FY20 Actual Target ■︓Product Sales ■︓Solutions Sales ◆︓Professional Solutions Business OP Margin Proprietary Micro LED Full Size Cinema Camera 8K System Camera Crystal LED “UHC-8300” CineAlta “VENICE” Sony IR Day 2018 79 Professional Solutions Business: Mid-Range Initiatives Imaging Products & Solutions Segment Industry Changes and Understanding of Challenges Action Plan
■ Changes in the media industry - Develop 4K & IP products and solutions - Rise of the OTT market, industry consolidation and greater reliance on IP and the cloud - Develop technology for the 5G era ⇒ Greater demand for cost reduction and efficiency - Full-scale demand for 4K and 8K - Pursue the sports and education markets (Start of satellite and IPTV 4K broadcasting) -Coming 5G era - Revise our product and business portfolio so as to better adapt to changes in the industry ■ Growing new market for B2B - Continuous cost reduction and operational ■ Improving profitability transformation
Remote Integration “REMI” Learnings Solution “Vision Exchange”
Stadium Control Room Data Center
Network
Examples of Solutions Businesses Sony IR Day 2018 80
Medical Business: Mid-Range Strategy Imaging Products & Solutions Segment
Profit Margin
Surgical Imaging Life Science Device Business Business (For Research and Clinical)
Monitor Peripheral Medical Device Business
IP Converter Printer Transition from single-device business Transition from research device to high value-added business business to medical device business
SOMED & Life Science Time Solutions Business Business (Research)
Cell Sorter 4K Surgical Endoscope System Cell Analyzer Surgical Microscope with 4K 3D Capabilities Sony IR Day 2018 81 Imaging Products & Solutions Segment
Reference Materials
Sony IR Day 2018 82
IP&S Sales by Business Category and Geographic Area Imaging Products & Solutions Segment
FY2017 Sales by Business Category FY2017 Sales by Geographic Area
Other Medical Asia Japan
Other Sales Digital Imaging Sales 650 650 bln yen China bln yen
U.S. Still and Video Professional Cameras
Europe
Sony IR Day 2018 83 IP&S Key Product Market Share (Revenue Basis) Imaging Products & Solutions Segment
FY2017 Still Camera Market FY2017 Video Camera Market Market Size: 1,400 bln yen Market Size: 390 bln yen
Sony ソニーシェアSony 20% 29%29%
ILC (Incl. Lens): 19% (#3) Components of Video Camera Pie Chart (#1 in Mirrorless Camera) Video cameras for consumer (POV + Conventional) DSC: 26% (#2) Video cameras for business (#1 in Premium DSC*1) (Pro-sumer + Professional)
*1 Premium DSC = DSC with large (1/1.7 inch and over) image sensors or high zoom (20x and over) Source: Sony Sony IR Day 2018 84
2. Mobile Communications Segment
Sony Corporation InvestorSony IR RelationsDay 2018 8585 FY2017 Overview Mobile Communications Segment
(bln yen) FY16 FY17 Actual Actual Sales 759.1 723.7 １ Smartphone unit sales decrease Operating 3.7 10.2 -6.5 (excluding -27.6 (FY16 14.6M → FY17 13.5M units) Income impairment)
２ Sharp increase in component costs
３ Negative impact of foreign exchange rates
４ Improvements in operational efficiency
5 Impairment
1 ２ 3 4 5
Operating loss recorded due to impairment charge Negative impact of unit sales decrease and sharp increase in component costs were offset by cost reductions; full-year profit was recorded on an operational basis Sony IR Day 2018 86
FY2018 Operating Results Forecast Mobile Communications Segment
(bln yen) FY17 FY18 Actual April Forecast
Sales 723.7 640 １ Impairment Operating -27.6 +12.6 -15 ２ Smartphone unit sales decrease Income (FY16: 13.5M → FY17 FCT: 10.0M units)
３ Positive impact of foreign exchange rates
４ Improvements in operational efficiency
1 ２ 3 4
Year-on-year profitability improvement by shifting away from less profitable models and engaging in continuous operating expense reductions
Sony IR Day 2018 87 Recurring Revenue Business: Stable Profit Structure & Next Steps Mobile Communications Segment Mid-Term Vision Going beyond being just an internet service provider
Fixed Line Communication Business: Cumulative Subscribers
SmartHome Healthcare Transportation CAGR 7%
LPWA※ Cloud Deep Learning Devices Technology
FY14 FY15 FY16 FY17
• Network quality improvements driving customer satisfaction • Deploying NURO services to more regions Call Centers Data Centers Network *LPWA: Low Power Wide Area Sony IR Day 2018 88
Smartphone Business: Review (Accomplishments) Mobile Communications Segment
Operating Expenses (billion yen) Warranty-Related Costs Forecast from FY15
Actual
-58%
(150 using FY16 FX rates)
Accelerated reduction through continuous Significant reductions through pursuit of further efficiencies quality improvements
Sony IR Day 2018 89 Smartphone Business: Review (Outstanding Issues) Mobile Communications Segment
Unit Sales (million units) Forecast from FY15 Issue: not improving Actual product lineup fast enough ⁻ Mid-term product planning and development ⁻ Design and development lead time
Sony IR Day 2018 90
Smartphone Business: Business Direction Mobile Communications Segment Mid-Term Vision Creating New Value to Customers for the 5G Era
FY2018 Business Direction Lean Transformation for Future Growth
Manufacturing, Product Sales Procurement, Operations
Add to strength and efficiency by leveraging the assets, business know- how and infrastructure of the Sony Group
Reduce operating expenses & lower break-even point
Sony IR Day 2018 91 Smartphone Business: Key Issues Mobile Communications Segment
Enhance Product Offerings: Fully Utilize Sonyʼs Technological Assets
DesignCamera Lens Sensing Battery
Wireless Data Audio Display Mechatronics Transmission
Product Development Process: Rebuild and Improve Efficiency Sony IR Day 2018
Strategic Direction for the 5G Era Mobile Communications Segment
Sony IR Day 2018 Smartphone Business: Sales & Operation Enhancements Mobile Communications Segment
Manufacturing, Procurement, Sales Operations
Project Europe Manufacturing Higher efficiency realized by Strategic partnerships with operators automated line introduction while bolstering open channel sales Service evolution through quality improvement
Key Actions Procurement • Technological collaboration including Create long-term partnerships 5G launch as “One Sony” • Realize efficiencies through the integration of Sonyʼs electronics Logistics sales operations • Enrich product lineup through Utilize Sonyʼs global network entertainment propositions Accelerate blockchain initiatives
Sony IR Day 2018 94
Smartphone Business: Operating Expenses & Break-Even point Mobile Communications Segment
Transformation into a Lean Business
OPEX Rebuild product development process and significantly improve efficiency
-30% Leverage Sony Group business know-how and infrastructure to bolster design, manufacturing, sales and operations
Sony IR Day 2018 95 MC Segment: Summary Mobile Communications Segment
FY2020 Target: OP: 20~30 billion yen Sales Level: 670 billion yen (reference only)
Recurring Revenue Business: Realizing solid growth by leveraging stable customer base
Smartphone Business: Create a lean, agile business without an excessive focus on revenue and units sold Build a sustainable business structure through ʻOne Sonyʼ initiatives Steadily implement initiatives to bolster and prepare for the future
Creating New Value to Customers for the 5G Era
Sony IR Day 2018 96
Sony IR Day 2018
Operation & Sales Platform Home Entertainment & Sound Segment May 22, 2018
Ichiro Takagi Corporate Executive Officer, Executive Vice President Officer in charge of Home Entertainment & Sound Business, In charge of Consumer AV Sales & Marketing, Manufacturing, Logistics, Procurement Sony Corporation Representative Director & President Sony Visual Products Inc. Representative Director & President Sony Video & Sound Products Inc. Agenda
1. End-to-End Operations
1. Manufacturing / Procurement / Logistics
2. Sales 2. HE&S Segment 1. FY2017 Review
2. FY2018 Action Plan
• TV Business
• Video & Sound Business
• Financial Forecast
3. FY2020 Financial Targets 3. Reference Materials
Sony IR Day 2018 98
1. End-to-End Operations
Sony Corporation InvestorSony IR RelationsDay 2018 9999 End-to-End Operations Until March 2015
Business Unit Operation Platform Manufacturing / Sales Platform Product Planning / Design Procurement / Logistics
From April 2015 through March 2018 Collaboration between Business Units and Sales Platform Saved 5 to 15 billion yen of Costs
Business Unit Operation Platform Manufacturing / Sales Platform Product Planning / Design Procurement / Logistics
From April 2018, Greater Efficiency of the Value Chain
Business Unit Operation Platform Manufacturing / Sales Platform Product Planning / Design Procurement / Logistics
Room for Potential Upside Improvement Sony IR Day 2018 100
Manufacturing / Procurement / Logistics
Manufacturing • Align manufacturing strategy with our business strategy while improving efficiency. • Enhance manufacturing technology, including automation, to support our product strategy.
Procurement • Leverage key partners to rebuild our procurement strategy to better align with our business and product strategy. • Ensure seamless procurement and optimal component costs through One Sony sourcing.
Logistics • Expand direct shipping and enhance logistical efficiencies based on our sales channel strategy. • Quickly change transportation methods to adapt to changes in the market environment.
Sony IR Day 2018 101 Sales
Sales strategy focused on select regions and product categories
Sonyʼs Sales (by Geographic Region) Asian Pacific (including China), Middle (bln yen) East, Latin America, Other
Asia Pacific, Middles East, Latin America, Other Invest primarily in growth areas such as audio Japan, U.S., Europe Augment sales operations
Japan, U.S., Europe
Maintain market position
Manage downside risk (Reduce costs and increase profit through better FY16 FY17 FY18 FY20 forecasting of market demand and improved supply chain communication)
Sony IR Day 2018 102
2. HE&S Segment
10 Sony IR Day 2018 103 Sony Corporation Investor Relations 3 FY2017 Review Home Entertainment & Sound Segment
Results Operating Income Analysis (bln yen) TV Business Sales 1,039.0 1,222.7 • Introduction of OLED TVs secured our brand position in the premium segment of the market. • Profitability improved due to high value-added product strategy focused on OLED, 4K and large-sized TVs. Model Mix Cost • Incremental margins improved due to enhanced supply chain Volume Price Improvement Increase Increase Erosion management and better control over inventory in response to Exchange changes in the market environment. Rates*1
Video & Sound Business Operating 85.8 • Grew sales primarily in the growth area of Audio. Income 58.5 • Improved profitability as a result of high value-added products. • Improved branding.
FY16 FY17 Issues TV Business • Can improve how we adapt to changes in panel prices.
Video & Sound Business • Can improve operations further. • Can improve collaboration with sales channels.
*1: Impact of foreign exchange fluctuations is calculated using the sales and costs denominated in each currency in FY2017 and comparing them with the previous fiscal year. Sony IR Day 2018 104
TV Business: Strategy and Priorities Home Entertainment & Sound Segment Maintain a stable business by pursuing a high-valueg added strategygy
◆Product Competitiveness Sonyʼs TV Sales Deliver the best customer experience through our
proprietary technology. 4K TVs Continue investing in technological innovation for the future. 2K TVs
◆Cost Competitiveness FY17 FY18 Manage expenses and streamline component procurement. （実績）Actual （最新⾒通し）Forecast
Ratio of 4K TVs* 35% 45% (Market) (Volume Basis) ◆Operational Competitiveness 44 inches 45 inches (Market) Continue improving our end-to-end operations (from Average Inch Size* 46 inches 47 inches (Sony) production to sales) so as to adapt to changes in the
Sony IR Day 2018 105 market. *Source: Sony TV Business: Product Concept Home Entertainment & Sound Segment Drive expansion of the premium 4K market Best Picture/Sound Unique Design Ease of Use Quality
Sony IR Day 2018 106
Video & Sound Business Home Entertainment & Sound Segment Consistently grow sales and profits through greater product competitivenesspgg in growth categories
Audio Market CAGR (FY16-18) +5% Other Audio Audio Growth Enhance competitiveness of products in 2.2 Tril Yen Categories 1.9 Tril Yen growth categories (e.g. headphones, wireless speakers)
68% 58% 65% Invest in technological innovation for FY16 FY17 FY18 FY20 future growth (acoustics which make you Other Audio Sonyʼs Sales CAGR (FY16-18) +10% Audio Growth feel like you are there) Categories
Strengthen operations
61% 49% 56% Enhance collaboration with sales platform
FY16 FY17 FY18 FY20 Sony IR Day 2018 107 FY2018 Forecast Home Entertainment & Sound Segment
Operating Income Analysis (bln yen) TV Business
Sales 1,222.7 Further increase added value of products through proprietary 1,150 technologies for high picture and sound quality, and excellent design and usability.
Model Mix Cost Customize product and sales strategy to each geographic Exchange Improvement Reduction region. Rates*1 Price Erosion Operating Income Further improve operations that adapt quickly to changes in the market environment. 85.8 86
Volume Decrease Video & Sound Business FY17 FY18 Enhance product competitiveness in audio growth categories. April Forecast Strengthen operations.
Address differences in geographic regions through greater collaboration with sales channels.
・ The FY2018 forecasts for the segments have been calculated using the assumed foreign currency rates of approx. 105 yen to the U.S. dollar and approx. 125 yen to the euro. *1: Forecasted impact of foreign exchange fluctuations is calculated using the sales and costs denominated in each currency in the FY2018 business plan and comparing them with the previous fiscal year. Sony IR Day 2018 108
FY2020 Financial Targets Home Entertainment & Sound Segment
Operating Income: 75 to 105 Billion Yen
※ Sales Amount (For Reference): 1,200 billion yen
Continue to generate stable cash flow through enhanced product competitiveness centered on high value-added products and enhanced end-to-end operations
Sony IR Day 2018 109 3. Reference Materials
11 Sony IR Day 2018 110 Sony Corporation Investor Relations 0
TV Business: FY2017 Sales by Product Type & Region / Unit and Revenue Share Home Entertainment & Sound Segment
Sales by Product Type Sales by Region
OtherJapan
2K TVs 4K TVs U.S. Sales Asia Pacific Sales 864.8 864.8 bln yen bln yen
China Europe
LCD TV Revenue Share by LCD TV Unit Share by Manufacturer Manufacturer (Source: Sony / For the most recent year) (Source: Sony / For the most recent year)
#5 #31位
Sony IR Day 2018 111 Video & Sound Business: FY2017 Sales by Product Type & Region Home Entertainment & Sound Segment
Sales by Product Type Sales by Region
Headphones Other Home Video Other Japan Audio Growth *1 Sound Bars Video Sales Category Asia Pacific Sales 357.9 357.9 bln yen U.S. bln yen China Audio Wireless Speakers Others Europe System Stereos
Audio Components
Digital Music Players WALKMAN
*1: ”Audio Growth Category” includes Headphones, Sound Bars and Wireless Speakers as its main products. Sony IR Day 2018 112
Video & Sound Business: Key Productsʼ Market Share (Revenue Basis) Home Entertainment & Sound Segment
Headphones Wireless Speakers Sound Bars
#3 #1 #3 ※ Japan / ※ Japan / ※ Japan U.S. / EU3*2 U.S. / EU9*1
#1 in Japan #1 in Japan
Digital Music Players (WALKMAN) Blu-ray Players/Recorders
1位#1 #22位 ※ Japan ※ Japan⽇⽶EU3 / U.S. / EU3*2
※ Source: Sony For the most recent year *1 EU9: UK, France, Germany, Italy, Spain, Netherlands, Sweden, Poland, Czech *2 EU3: UK, France, Germany Sony IR Day 2018 113 Semiconductors Segment
Sony IR Day 2018
Semiconductors Segment
May 22, 2018
Terushi Shimizu Business Executive Sony Corporation Representative Director and President Sony Semiconductor Solutions Corporation
Agenda Semiconductors Segment
1. FY2017 Review 2. FY2018 Action Plan 3. FY2018 – FY2020 Mid-Range Plan
Sony IR Day 2018 115 Semiconductors Segment
1. FY2017 Review
11 Sony Corporation InvestorSony IR RelationsDay 2018 116 6
FY2017 Review Semiconductors Segment
Achieved record high profit for the Semiconductors business
Operating Income Analysis (bln yen) Achievements
Sales 773.1 850.0 Increased image sensor sales and profit Image Sensors Image Sensors 548.6 649.4 Steady customer expansion for automotive 164.0 image sensors Improved operating results in the non- Others image sensor businesses
Operating Issues Mobile Income Sensor Ability to respond to fluctuations in demand Earthquake Mobile from Chinese smartphone manufacturers Exchange Module ▲7.8 Rates Optimization of inventory level High currency sensitivity
1 USD = 108.4 yen 110.9 yen
Sony IR Day 2018 117 Semiconductors Segment
2. FY2018 Action Plan
11 Sony Corporation InvestorSony IR RelationsDay 2018 118 8
Our View of the Image Sensor Market Semiconductors Segment Mobile application growth led by dual lens and sensing. Growth in new areas expected. Trend in World Wide Image Sensor Shipment Amount
New Area New Area Mobile Sensing • Automotive: Rise of the ADAS market Mobile Dual Lens (Sub Camera) • Factory Automation: Market expansion due to Mobile Front + Rear smart manufacturing AV • Security: Market expansion due to automatic monitoring using AI technology
Mobile Area • Market expansion from dual lens and mobile sensing
AV Area • Expansion of high-end sensor market CY 11 12 13 14 15 16 17 18 19 20
*Source: Sony Sony IR Day 2018 119 Activities for Mobile Semiconductors Segment Evolve in plane, time and space to deliver “KANDO” in addition to achieving DSLR camera-like image quality. Evolution of Mobile Sensors
Present Future ~
Image Quality Plane High Dynamic Range / High Sensitivity / Low Noise Wide Angle / Free from Enlargement Structure
No blocked up shadows Time Super Slow Free from Shutter
Reproduce kando as is Space Sharpness even Depth / Focus in dark places Three-Dimensional / Immersive
Sony IR Day 2018 120
Activities for Sensing Semiconductors Segment Succeeded in developing back-illuminated high-resolution ToF* sensor capable of distance measurement. Anticipate deployment to a wide range of use cases.
Development of ToF Sensor Use Cases of ToF Sensor
Present Front-illuminated ToF Sensor
Automotive aibo
Future FA
Back-illuminated ToF Sensor Mobile Drone
*ToF: Time of Flight Sony IR Day 2018 121 Activities for Automotive Semiconductors Segment Completed commercialization of stacked image sensor for ADAS. Strengthen cooperation with key players. Realization of “Safety Cocoon” Cooperation with Key Players*
Commercialization of High Resolution Stacked Sensor for Automotive Cameras Conventional Product
Capable of capturing a sharp Development image of signs 160 meters away Product
*Logos are arranged in alphabetical order Sony IR Day 2018 122
Activities for Factory Automation Semiconductors Segment The market is expanding due to industrial automation. Transition from CCD to CMOS sensor proceeds. Evolution of FA Sensors
Present Future ~ Front-illuminated Back-illuminated Stacked CCD CMOS GS* CMOS GS CMOS GS
Low Error Rate Increase Throughput High Speed and Automation of High Resolution Inspection Production Line Infrared Sensor
Transition from CCD Salt Sugar Invisible Light Inspection
*GS: Global Shutter Sony IR Day 2018 123 Activities for Security Semiconductors Segment The security market is expanding due to the penetration of automatic monitoring using AI technology. Evolution of Security Sensors
Present Future ~ Back-illuminated Low Noise High Sensitivity CMOS Miniaturization Stacked
Full Color Image Wider Area Image High-definition Image Optimization for Capturing at Night Capturing in Outdoors Capturing in Wider Area AI monitoring Region Control
FHD ５M
Data Capacity Reduction
Sony IR Day 2018 124
Activities for Technology Development (1) Semiconductors Segment Proceed with technology development that creates added value responding to market needs. Direction of Technology Development
Present Future ~
Back-illuminated Sensitivity Improvement Technology Stacked Miniaturization and High Functionality Development Performance for New Evolution Cu-Cu* Connection Productivity Improvement and Space Saving Sensing Market Pixel-Parallel ADC Image Distortion Cancellation
Function Event Driven Power Consumption 1/100 Expansion Region Control Data Capacity Reduction
ToF Distance Information Detection Performance Polarization Distortion and Scratch Detection Expansion Infrared Invisible Light Inspection
*Cu-Cu: Copper to Copper Sony IR Day 2018 125 Activities for Technology Development (2) Semiconductors Segment Developed event-driven stacked CMOS image sensor realizing 1/100 power consumption. Image of Sensor Image of Motion Detection
Realized by stacked structure with Cu-Cu connection
Motion Detection & Automatic Switching
Sony IR Day 2018 126
Activities for Technology Development (3) Semiconductors Segment
Movie
Sony IR Day 2018 127 FY2018 Forecast Semiconductors Segment
Increase Capital Investment and R&D to Accelerate “Preparation“
Operating Income Analysis (bln yen) Environment
Advancement of dual lens for smartphones Sales 850.0 870 Image Sensors Image Sensors Rise of sensing and automotive market 649.4 690 Appreciation of the yen and sluggish smartphone 164.0 market growth are risks
One Time Basic Policy Items 100 Depreciation/ Operating Exchange R&D Expenses Increase capital investment and R&D Rates Income Inventory to accelerate “Preparation“ Change Maximize profitability of mobile and AV fields which
Quantity Increase/ Product Mix are the leading profit drivers Improvement/ Cost Reduction Foster new areas such as sensing and automotive Continue activities to reduce manufacturing cost of sensors (Apr. Fct) 1 USD = 110.9 yen 105 yen
Sony IR Day 2018 128
Semiconductors Segment
3. FY2018 – FY2020 Mid-Range Plan
12 Sony Corporation InvestorSony IR RelationsDay 2018 129 9 Financial Target for FY2020 Semiconductors Segment
Financial Target for FY2020 Operating Income 160 - 200 billion yen *1 USD = 105 yen
Sales Amount (For Reference): 1,100 billion yen
Mid-Range Plan for FY2020 Maximize mobile sensor profit by enhancing response to environmental changes Aim for profit contribution by new areas including sensing and automotive business Promote technology development including function and performance expansion
Sony IR Day 2018 130
Operating Income Targets for FY2020
（ billion yen ） Game & Network Services (“G&NS”) Segment 130 〜 170
Music Segment 110 〜 130
Pictures Segment 58 〜 68
Home Entertainment & Sound (“HE&S”) Segment 75 〜 105
Imaging Products & Solutions (“IP&S”) Segment 85 〜 105
Mobile Communications (“MC”) Segment 20 〜 30
Semiconductors Segment 160 〜 200
Assumed foreign currency exchange rates 1 US dollar : Approx. 105 yen 1 Euro : Approx. 115 yen
(For your reference) Branded Hardware* 180 〜 240
*The sum of HE&S, IP&S and MC segments Sony IR Day 2018 131 Cautionary Statement
Statements made in this presentation with respect to Sonyʼs current plans, estimates, strategies and beliefs and other statements that are not historical facts are forward- looking statements about the future performance of Sony. Forward-looking statements include, but are not limited to, those statements using words such as “believe,” “expect,” “plans,”“strategy,”“prospects,”“forecast,”“estimate,”“project,”“anticipate,” “aim,” “intend,” “seek,” “may,” “might,” “could” or “should,” and words of similar meaning in connection with a discussion of future operations, financial performance, events or conditions. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These statements are based on managementʼs assumptions, judgments and beliefs in light of the information currently available to it. Sony cautions investors that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, and therefore investors should not place undue reliance on them. Investors also should not rely on any obligation of Sony to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Sony disclaims any such obligation. Risks and uncertainties that might affect Sony include, but are not limited to: (i) the global economic and political environment in which Sony operates and the economic and political conditions in Sonyʼs markets, particularly levels of consumer spending; (ii) foreign exchange rates, particularly between the yen and the U.S. dollar, the euro and other currencies in which Sony makes significant sales andincursproductioncosts, or in which Sonyʼs assets and liabilities are denominated; (iii) Sonyʼs ability to continue to design and develop and win acceptance of, as well as achieve sufficient cost reductions for, its products and services, including image sensors, game and network platforms, smartphones and televisions, which are offered in highly competitive markets characterized by severe price competition and continual new product and service introductions, rapid development in technology and subjective and changing customer preferences; (iv) Sonyʼs ability and timing to recoup large-scale investments required for technology development and production capacity; (v) Sonyʼs ability to implement successful business restructuring and transformation efforts under changing market and regulatory conditions; (vi) changes in laws, regulations and government policies in the markets in which Sony operates, including those related to taxation and corporate social responsibility; (vii) Sonyʼs ability to implement successful hardware, software, and content integration strategies, and to develop and implement successful sales and distribution strategies in light of new technologies and distribution platforms; (viii) Sonyʼs continued ability to devote sufficient resources to research and development and, with respect to capital expenditures, to prioritize investments correctly (particularly in the electronics businesses); (ix) Sonyʼs ability to maintain product quality and customer satisfaction with its products and services; (x) the effectiveness of Sonyʼs strategies and their execution, including but not limited to the success of Sonyʼs acquisitions, joint ventures and other strategic investments; (xi) significant volatility and disruption in the global financial markets or a ratings downgrade; (xii) Sonyʼs ability to forecast demands, manage timely procurement and control inventories; (xiii) Sony's reliance on external business partners, including for the procurement of parts, components, software and network services for its products or services, the manufacturing, supply and distribution of its products, and its other business operations; (xiv) the outcome of pending and/or future legal and/or regulatory proceedings; (xv) shifts in customer demand for financial services such as life insurance and Sonyʼs ability to conduct successful asset liability management in the Financial Services segment; (xvi) the impact of changes in interest rates and unfavorable conditions or developments (including market fluctuations or volatility) in the Japanese equity markets on the revenue and operating income of the Financial Services segment; (xvii) the ability of Sony, its third-party service providers or business partners to anticipate and manage cybersecurity risk, including the risk of unauthorized access to Sonyʼs business information, potential business disruptions or financial losses; and (xviii) risks related to catastrophic disasters or similar events. Risks and uncertainties also include the impact of any future events with material adverse impact. 132