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Electronics

Sony cuts revenue forecast ahead of PlayStation 5 debut

Surge in image sensor demand supports rise in operating income

Weak sales of PlayStation 4 hardware has dented Sony's revenue forecast. (Photo by Yuki Kohara)

TOKYO -- Sony on Wednesday cut its revenue forecast by 200 billion yen ($1.8 billion) for the fiscal year ending in March 2020, blaming lackluster sales of PlayStation 4 hardware and gaming software.

Sony changed its revenue estimation for this business year to 8.4 trillion yen, a decline of 2% from its July forecast. However, it expects operating profit to rise by 4% to 840 billion yen.

The revenue downgrade, the second this year, was mainly driven by a slowdown in its gaming business, where the conglomerate struggled to sell PS4 hardware, released almost six years ago.

In July, Sony lowered its PS4 sales target for the year by 1 million units to 15 million. On Wednesday, Sony further lowered the forecast to 13.5 million units.

Software sales also fell. Last year, Sony released its smartphone game Marvel's Spider-Man. The game was a global hit and boosted game sales exponentially, setting a high bar for this year.

Weakening PS4 sales led to a 2% drop in Sony's revenue to a little over 4 trillion yen for the six months through September from the same period last year.

Yoshiharu Izumi, a senior analyst at SBI Securities, said: "The announcement of the PS5 may have led to consumers wanting to wait for the new hardware and not buy PS4."

Earlier this month, Sony announced that the next generation console, PlayStation 5, will be launched at the end of 2020.

Hiroki Totoki, Sony's chief financial officer, expressed confidence about the new console at the earnings conference, saying, "From what I have heard from game developers and PS4 users, the expectation for PS5 seem to be very high."

Despite the weak PS4 sales, Sony forecasts that operating profit for the current fiscal year will increase by 30 billion yen to 840 billion yen, supported by strong sales in its image sensor business.

Image sensors are used in smartphone cameras and are experiencing a surge in demand, with high-end cameras in the devices expected to benefit from ultrafast 5G networks.

Totoki said, "We expect demand to still be strong after this year."

It was revealed on Tuesday that Sony plans to invest 100 billion yen in a new factory in Nagasaki Prefecture, solely to produce image sensors. The plant is expected to go online as soon as the fiscal year starting in April 2021.

The company was the world's biggest image sensor maker last year, with a 50% market share. With the new plant, Sony aims to lift its global share to 60% by 2025.

Operating profit for the first half of the fiscal year increased 17% to 509 billion yen. While the company's gaming business struggled because of the drop in sales, its semiconductor segment surged in sales and helped support the increase in operating profit.

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