Sony 2007 Annual Report Download - page 62

59
joint development focused on 90 and 65 nanometer process
technology for utilization in the design and manufacturing of the
Cell/B.E. Moreover, in 2006 Sony Corporation, IBM, and Toshiba
concluded a new joint development agreement and an alliance
for the research and development of advanced semiconductor
technology has begun.
Sony has reconsidered its investment policy in the semicon-
ductor business. In the future, Sony will carefully select invest-
ments and adopt a strategy to more clearly focus on the CCD
and CMOS image sensor, television- and video-related, and
Game-related businesses.
In the area of other key devices, S-LCD Corporation (“S-
LCD”), Sony’s joint venture with Samsung Electronics Co., Ltd.
(“Samsung”), which is based in South Korea, started production of
7th generation amorphous thin-film transistor (“TFT”) liquid crystal
display (“LCD”) panel (glass panel size: 1,870mm x 2,200mm) in
April 2005 and since October 2005 has been producing 60,000
sheets a month. In July 2006, S-LCD increased its production
capacity to 75,000 sheets a month and further increased its
production capacity to 90,000 sheets in January 2007.
In July 2006, Sony Corporation and Samsung signed the final
contract regarding the manufacturing of 8th generation TFT LCD
panels (glass panel size: 2,200mm x 2,500mm) at the S-LCD
joint venture. The total amount of the investment is expected to
be approximately 200 billion yen (approximately 50 percent of
which will be borne by Sony Corporation), the major part of
which has already been completed. The start of mass production
is targeted for summer 2007 with production capacity expected
to be 50,000 sheets a month.
■GAME
In the Game segment, for the PS2, which is in its eighth year since
release, Sony estimated a decrease in production shipment
volume, including hardware and software, for the fiscal year ended
March 31, 2007. However, as the PS2 platform is still recording
favorable sales around the world, Sony will continue to try to
maintain the scale of this business. Sony is strongly promoting the
PSP platform by offering new ways to enjoy it, such as by increas-
ing interconnectivity with the PS3, along with expanding the lineup
of software unique to the PSP. Sony expects a significant reduction
in the operating loss of the PS3 business with the rollout of an
exciting software lineup, in addition to seeking rapid cost
reductions, mainly by shrinking the size of semiconductor chips
and reducing the number of parts in the console.
■PICTURES
In the Pictures segment, Sony faces intense competition, rising
expenses, including advertising and promotion expenses, and a
growing trend toward digital piracy. In addition, the DVD format
is ten years old and is showing signs of maturation. To meet
these challenges, Sony is working to distribute a diversified
portfolio of motion pictures with broad worldwide appeal on
existing and new home entertainment formats, including Blu-ray
Disc, and on other emerging platforms, including digital download.
■FINANCIAL SERVICES
In the Financial Services segment, the value of assets accumu-
lated by the businesses in the segment has grown continuously
over the past several years, resulting in a large portion (approxi-
mately 42 percent as of March 31, 2007) of Sony’s total assets
being accounted for by the Financial Services segment. To
strengthen asset management and risk management in parallel
with this growing asset value, enhance disclosure of business
details, and offer customers integrated financial services tailored
to their individual needs, Sony established Sony Financial Holdings
Inc. (“SFH”) in April 2004. SFH functions as a holding company
overseeing Sony Life Insurance Co., Ltd. (“Sony Life”), Sony
Assurance Inc. (“Sony Assurance”) and Sony Bank Inc. (“Sony
Bank”), with the aim of increasing the synergies among these
businesses.
With respect to the environment in the financial services
industry, Sony expects increasingly intense competition as it
confronts changes in its business environment. In particular,
Sony expects competition to result from the deregulation and
liberalization of additional insurance premiums, postal
privatization and the complete lifting of the ban on the sale of
insurance products at banks, as well as changes in the macro-
economic environment brought about by Japan’s declining
population, low birthrate and growing proportion of elderly
citizens. In response to this changing environment, each of
Sony’s financial services businesses, which are latecomers to
the life insurance, property and casualty insurance and banking
industries, make use of distinctive, individual industry-specific
business models and plan to achieve further business expansion
and even higher levels of customer satisfaction.
OPERATING RESULTS
Operating Results for the Fiscal Year Ended March 31, 2007
compared with the Fiscal Year Ended March 31, 2006
OVERVIEW
Sony’s sales and operating revenue (“sales”) for the fiscal year
ended March 31, 2007 increased 10.5 percent compared with
the previous fiscal year. Sales within the Electronics segment,
the Game segment and the Pictures segment increased while
Financial Services revenue decreased. In the Electronics
segment, although there was a decline in sales of such products