Reports have surfaced indicating that Sony is planning to expand its chip operations in the next few years by investing more capital and manpower. As a part of the move, the company would be allocating 40 percent of its new engineering staff in Japan to chip technologies, which also includes image sensor research and development.
The company plans to hire 320 new engineers this year as well as next year. However, it is worth mentioning that this figure only represents the Japanese staff, and doesn't account for international staff. Comparatively, the company hired 250 employees in 2018.
The company also intends to invest 600 billion yen or $5.4 billion in imaging sensors over the course of the next three years. This means that half of the Japanese conglomerates planned capital expenditure would go into image sensor production. Currently, Sony accounts for half of the imaging sensor supply in the smartphone market and diverting more resources towards it could help the company seize increasing opportunities in IoT and self-driving cars. During its better days, the sensor business was a major contributor to the company's bottom line.
Sony announced its third-quarter results recently, according to which sales decreased 10% YoY because of a sharp decline in financial services, lower smartphone revenue, and semiconductor volatility. Moreover over, the company's game & network services also displayed reduced profitability because of lower PS4 sales.
This compelled the company to lower its FY18 guidance in various segments, including imaging and mobile and sent its stock tumbling down. However, analysts believe that with new game software titles, the upcoming release of the Sony Xperia XZ4, and the increasing demand for image sensors by the smartphone market would improve the company's finances.
For now, the company has reduced its annual profit outlook for imaging sensors to 130 billion yen, which accounts for merely 15 percent of Sony's overall profit. This could be blamed in part to the weakening smartphone market. Although smartphone sales might pick up again with the impending arrival of 5G networks and the introduction of new form factors, it is crucial that Sony diversifies beyond smartphone technologies to tap new sources of revenue.
According to analysts, the image sensor market will be valued at $23.2 billion by 2023. Last year, Sony led the market, trailed by Samsung and Omnivision. The company's market share increased to 42 percent in 2017 and a huge sum of its business came from Apple as the Cupertino giant uses its sensors in its iPhones.
Maintaining its lead would help Sony cash in on the growing market. Sony recently also bested Canon to become the leading camera manufacturer, although it's worth mentioning that the camera business falls under the company's Imaging Products unit, which is separate from its imaging sensors wing.
In anticipation of industry growth that would be fueled by the next generation of wireless networks and artificial intelligence, various chipmakers are also planning to increase their long-term investment. For instance, SK Hynix has announced plans invest $107 billion in four memory chip factories in South Korea in 2022.