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Electric dreams drive the Sony share price higher

During a keynote presentation at the global tech event the Consumer Electronics Shows (CES) in Las Vegas on 4 January, Sony [TYO: 6758] rolled out the Vision-S electronic vehicle (EV) – first seen last year – and unveiled a separate concept SUV. It also announced that it would be launching a new subsidiary, Sony Mobility, sometime in the spring.

Speaking at the event, Sony chairman, president and CEO Kenichiro Yoshida declared: “With our imaging and sensing, cloud, 5G and entertainment technologies, combined with our contents mastery, we believe Sony is well positioned as a creative entertainment company to redefine mobility.”

Yoshida sees mobility as an ‘entertainment space’, and in that regard Sony is well placed to maximise the in-vehicle experience. He stated that Vision-S passengers could even play PlayStation games by connecting remotely to a console at home, in addition to the ability to play streaming games through the cloud.

Tokyo-listed shares rose by more than 4% to a 52-week high of JPY15,725 on 5 January when trading opened, following the presentation overnight. The Sony share price closed on 6 January at JPY14,455. The stock is currently trading at its highest level in over 20 years.

 

 

 

 

Positive buzz

Sony’s potential foray into EVs has been on the cards for some time. The Vision-S model debuted at CES 2020, although the company consistently denied reports that it was moving into the automotive space.

A year later at CES 2021, Izumi Kawanishi, senior vice president of Sony's AI and robotics business, stressed that the focus of the Vision-S was on autonomous driving systems and capabilities.

Kawanishi had said in January 2021 that Sony had no production plans in place at the time, reported MotorTrend. "We have to focus on safety and entertainment for the future.” Given Sony’s background in developing cameras and sensors, and selling entertainment systems, Kawanishi believes the company is in a strong position to provide “that kind of content for the automotive space”.

However, as a result of the positive reaction and buzz that its Vision-S has created, Sony seems to be serious about taking its concept into commercialisation.

"The excitement we received after the announcement … encouraged us to further consider how we can bring creativity and technology to change the experience of moving from one place to another,” Sky News reported CEO Yoshida as saying at the event.

 

Top long investment

Sony is not the only consumer electronics giant aiming to take a bite out of the EV market. Apple [AAPL] is also aiming to launch its own self-driving EV in 2025.

There’s no guarantee when Sony’s Vision-S will go into commercial production. However, according to Investor’s Business Daily, Jordan Klein, managing director at Mizuho Securities, covering the tech, media and telecoms industries, is expecting production to start small in 2024 or 2025. Klein has identified Sony as “a top long [investment] idea” for 2022.

The move into mobility does make sense. The global chip semiconductor shortage and supply chain delays have highlighted the risks and headwinds facing hardware.

“The excitement we received after the announcement … encouraged us to further consider how we can bring creativity and technology to change the experience of moving from one place to another” - Sony CEO Kenichiro Yoshida

 

Although Sony reported record-breaking Q1 profit for the three months to the end of June 2021, boosted by pandemic-fuelled demand for music content and devices, gaming-related sales only increased marginally. The segment’s operating income declined by around a third from Q1 2020. In the following quarter, sales climbed 27% year-over-year, but the gaming segment’s operating income fell around a fifth. The decline in growth was attributed to the "deterioration of operating results for hardware and peripheral devices”, and the fact that PlayStation 5 units were priced lower than manufacturing costs.

In contrast, Sony’s imaging and sensing technology segment, which covers automotive lidar detection, saw sales fall 9.3% from Q2 2020, while its operating income only fell by a couple of percentage points.

Gaming will no doubt continue to be Sony’s blockbuster revenue generator — it accounted for a little under a quarter of Q2 2021’s total — but the company will want to innovate to maintain its competitive edge. Finding ways to put its sensors to use, such as through autonomous driving, for example, will likely be crucial.

“With megatrends in society shifting from ‘mobile’ to ‘mobility’, Sony’s imaging and sensing technology is set to become even more relevant in the future,” reads the company website.

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