Sony sees software subscription as the future for data analysis image sensors

TOKYO (Reuters) – Sony Corp’s image sensor business aims to replicate PlayStation’s success in addressing its reliance on a handful of manufacturers in the fickle smartphone market: it plans to sell subscription software for data analytics sensors in situ.

Transforming the light conversion chips into a software platform, essentially similar to the PlayStation Plus video game service, amounts to a radical change for the $ 10 billion business, which built its domain through hardware advancements.

The effort coincides with Sony’s recurring pursuit of revenue after years of losses in the volatile consumer electronics sector. The success, analysts said, could serve as a reply to calls by activist investor Daniel Loeb for the business to be spun off.

“We have a strong position in the image sensor market, which serves as a gateway for image data,” said Hideki Somemiya of Sony, who heads a new team developing sensor applications.

Analyzing such data with artificial intelligence (AI) “would form a market larger than the growth potential of the sensor market in terms of value,” Somemiya said in an interview, pointing to the recurring nature of software-dependent data processing versus to a hardware-only business.

Sony has developed what it calls the world’s first image sensor with an integrated artificial intelligence processor. The sensor can be installed in security cameras where it can identify factory workers who are not wearing helmets, for example, or it can be mounted in vehicles to monitor driver drowsiness. Importantly, the software can be modified or replaced wirelessly without disturbing the camera.

The Japanese conglomerate expects customers to subscribe to its sensor software service through monthly fees or licenses, just as players buy a PlayStation console and then pay for the software or subscribe to online services.

Sony has not disclosed a service start date, but at a press conference last month, Somemiya said there was demand for “retailers, factories, mainly business-to-business.”

A CHANGE OF MIND

South Korea’s Samsung Electronics Co Ltd and Chinese-owned OmniVision Technologies are also expanding the software capabilities of image sensors, but analysts said a 52% market share gives Sony a competitive advantage in the pop-up area.

Still, Somemiya said, a software-centric approach will require a change of mind in a division accustomed to meeting the specifications of smartphone manufacturers, only five of which account for most of its revenue.

The new direction comes as the hedge fund Third Point LLC, a minority investor led by Loeb, continues to pressure Sony to separate from the image sensor division, saying its value could be higher if it was not masked by the complexity of the company.

Sony CEO Kenichiro Yoshida replies that maintaining internal division gives him easier access to the group’s resources and has said that diversity is the company’s strength.

“CEO Yoshida’s message suggests that Sony will focus on earnings growth with diversified businesses,” said JPMorgan Securities analyst Junya Ayada.

Sony’s portfolio may be growing in complexity, but it still reported two consecutive years of record earnings through March 2019, Ayada said.

Having technology with diversified applications can also be advantageous in uncertain times, said Atsushi Osanai, a professor at the Waseda University School of Business.

“The next big thing for sensors may be in autonomous driving technology, but it’s important to explore other applications,” Osanai said.

However, others said the potential of the sensor software subscription service is difficult to consider, as it could take years for such a business to become a driver of Sony’s overall growth.

“The number of sensors used in factories and retailers is likely to be small compared to those in the smartphone market of more than a billion units,” said analyst Hideki Yasuda of Ace Securities.