Sony 2002 Annual Report Download - page 15

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13
Message from Top Management
Game Business Strategy
Question: To start with, would you give us your thoughts on the performance of the Game business
in the year ended March 31, 2002?
Kutaragi CEO, SCE During the year under review, the PlayStation 2 (PS2) business finally
entered a harvest stage with sales topping the 1 trillion yen mark for
the first time ever and operating income reaching approximately 83
billion yen.
This performance can be attributed to the positive growth cycle
generated by the release of a steady stream of captivating software in
Japan, the U.S. and Europe, which in turn, propelled sales of the PS2
console even higher in the console’s second year on the market. The
backward compatibility of PlayStation (PS) software on the PS2
platform fueled strong growth in sales of PS software as well. Our
success in reducing production costs has enabled PS2 hardware to
become profitable in the latter half of the year under review, which
has contributed to an overall increase in profit.
Question: What is the outlook for the Game business in Fiscal Year 2002 (the year ending March 31, 2003)?
Kutaragi CEO, SCE Cumulative PS shipments are approximately 90 million units world-
wide. And compared to PS, PS2 consoles are growing at more than
twice the speed of the original PS following its launch. In May of this
year, cumulative shipments exceeded 30 million units and have
continued to be strong. In Fiscal Year 2002, we expect to see many
new software title releases which will contribute to the penetration of
the PS2. Due to the introduction of broadband network connections,
we are also expecting expansion of entertainment content and
services beginning with online games.
Question: The semiconductors at the heart of the PS2 console are not purchased from external
sources but are produced in-house, at semiconductor facilities invested in by Sony. Why is
this so and what are the benefits to Sony?
Kutaragi CEO, SCE Semiconductors account for a significant share of the manufacturing
cost of game consoles. If we had purchased key semiconductors for
PS2 from an external supplier, we would have allowed a lot of value
to escape. Put another way, by producing semiconductors in-house,
we can capture a considerable amount of value within our organization.
With the home computer entertainment market growing at a scale of
20 million units annually, using leading-edge semiconductors, it is
now possible to achieve high investment benefits with semiconductor
production. Sony Computer Entertainment’s investment of a cumula-
tive approximate 250 billion yen in semiconductor-related production