Sony – Car sense

Sony finally makes sense

• When Sony launched its prototype Vision-S EV at CES 2022 it looked like a bad case of FOMO (fear of missing out) but it has become clear that the real aim is to be a lead vendor of sensors for EVs which makes much more sense.
• As many companies are finding out (see here), making cars is a difficult and very capital intensive business which is why I viewed the move by Sony into EVs as non-sensical and doomed to failure.
• However, given its recent commentary, I suspect that Sony does not intend to put the Vision-S into production but instead use it as a test system to develop a business that makes real sense for Sony which is sensors.
• Sony is already the leading vendor of image sensors for smartphones and as a result, it makes sense to leverage that strength into other markets.
• Vehicles on the other hand make no sense for Sony which is why it has launched a joint venture with Honda from which any products are likely to be Honda EVs with Sony’s sensors n them.
• The vehicle may also carry some of Sony’s software and services which is going to be a critical piece of EVs and about which Sony knows more than Honda does.
• However, software has historically been a real problem for Sony and I think that the real action for Sony is going to be sensors only.
• Regardless of which autonomous driving philosophy one subscribes to, everyone agrees that a camera array of some description is going to be a central part of every vehicle that has any form of autonomous capability.
• Hence, in a market which remains flat at around 80m units a year and has an average of 4 cameras that would add up to an end market of around 320m image sensors.
• I have great doubts whether Sony will be able to push into machine vision using the output of its sensors as its AI leaves a lot to be desired but its position in smartphone image sensing is an indicator of how important this business could be to Sony.
• Sony has made a lot of noises about using AI and robotics to enhance its products, but the reality is that it is not very good at either of these technologies and I suspect that it will not make any headway.
• However, as cameras and Lidar are likely to be the backbone of all machines (including vehicles) that sense and react to their environment, there is a very large addressable market emerging.
• Sony’s excellence in imaging sensing puts it in a strong position to benefit from this trend and as long as it does not waste the extra profit on trying to extend into AI or other fashionable trends, this benefit should accrue directly to shareholders.
• I remain pretty indifferent to Sony’s shares and continue to prefer other semiconductor vendors such as Qualcomm, MediaTek and TSMC.