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Sony confirms possible TSMC partnership on Japan chip factory

  • October 28, 2021
  • , Nikkei Asia , 7:11 p.m.
  • English Press

JADA NAGUMO, Nikkei staff writer

 

TOKYO — Sony Group on Thursday confirmed it is considering a plan to join with Taiwan Semiconductor Manufacturing Co. in building a chip factory in the western Japanese prefecture of Kumamoto.

 

The confirmation came during a news conference to announce Sony’s first-half earnings. “The stable procurement of semiconductors is a crucial issue amid the chip crunch, and [TSMC’s plant] could be a solution,” said Hiroki Totoki, the company’s chief financial officer.

 

Sony outsources production of most of its logic chips, which are a key component in image sensors. The company is stepping up efforts to attract more clients and improve the quality of its sensors so they can be used in a wider range of products. But the global chip crunch is making it difficult to find enough logic chips — a situation that is likely to persist.

 

Totoki said Sony will continue to hold discussions with TSMC and Japan’s Ministry of Economy, Trade and Industry regarding the partnership, which includes sharing Sony’s expertise in its Japanese chip operations with TSMC, as well as making the proposed plant one of its suppliers of logic chips.

 

The CFO avoided commenting on the amount of investment but noted that “It will be very meaningful for us to further strengthen and deepen our partnership with TSMC, which has the world’s most advanced semiconductor production technology.”

 

Earlier this month, TSMC, the world’s biggest contract chipmaker, announced it is preparing to build its first-ever chip plant in Japan. Construction would begin next year, and plans are for production to get underway in 2024, the company said.

 

Sony CFO Hiroki Totoki said Sony will continue to hold discussions with TSMC and the Japanese government regarding a chip factory at Kumamoto, at an online press conference on Oct. 28. (Screenshot from Sony’s website)
 

The move comes after COVID-19 sped up digital transformation around the world, driving demand for more chips. The Japanese government has voiced its support for the project and plans to offer a multiyear aid package. Bringing TSMC’s chip plant on shore has also been a goal for Japan in terms of economic and national security.

 

The cost of the project is estimated to be around 1 trillion yen ($8.8 billion). Nikkei previously reported that Sony will jointly invest in the plant.

 

Sony is TSMC’s biggest Japanese client. The new plant will be located in Kumamoto, on land near a chip factory owned by Sony as the conglomerate aims to secure stable procurements of semiconductors for image sensors used in smartphones.

 

Sony controls around 50% of the global market for image sensors used in smartphones. The company is also trying to broaden the scope of its business by leveraging its CMOS image sensor technology and has been accelerating business expansion in areas like electric vehicles and smart city development.

 

The same day, Sony revised up its annual earnings forecast for the second time this year, saying on Thursday that it expects a record operating profit of over 1 trillion yen for the year ending March 2022.

 

The company anticipates operating profit to increase 9% from a year ago. Previously, it had expected a 3% rise to 980 billion yen.

 

Sony also revised its annual net profit outlook to 730 billion yen. It trimmed its profit decline from a year earlier to 29% — previously Sony predicted net profit to drop 32% this year. The company increased its revenue outlook by 200 billion yen to 9.9 trillion yen, up 10% from a year earlier.

 

The company last year enjoyed a surge in gaming revenue due to pandemic-driven demand, logging a then-record operating profit of 971 billion yen. Sony anticipates this year’s operating profit, the first year it will be using IFRS accounting standards, to top last year’s on the back of strong sales of TVs and image sensors for industrial equipment. A rise in music streaming revenue, as well as sales from its anime business, will also support the boost.

 

The reopening of movie theaters overseas is pushing up sales for Sony’s motion pictures. Its acquisition of U.S. anime-streaming service Crunchyroll is also contributing to growing revenue.

 

On the other hand, its breadwinner gaming business is slowing as COVID-driven demand wanes. While Sony has been able to maintain steady sales of its PlayStation 5 console and related content, operating profit for the business has suffered from fewer software sales.

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