Sony lifts outlook on entertainment demand despite tariff threat

[TOKYO] Sony Group raised its earnings forecast on Thursday (Aug 7) after a strong showing from its entertainment divisions that outweighed the threat of new US tariffs on chips.

The Tokyo company now expects operating profit for the year ending March to be 1.3 trillion yen (S$11.3 billion), versus the average of analyst estimates of 1.4 trillion yen. Back in May, in the midst of uncertainty around Washington’s new import tax regime, Sony had warned its profit would take a 100 billion yen hit and set its forecast at 1.3 trillion yen. It said that it now sees a tariff impact of around 70 billion yen on its operating income.

Sony’s music unit has grown to be a reliable pillar of the group, bringing in a steady flow of revenue as opposed to the company’s more prominent but fluctuating consumer electronics, PlayStation and image sensors. Royalty income from music streaming operators remains strong, and popular anime works produced under the Sony umbrella are helping catapult in-house artists into the mainstream.

Sony’s anime units have consistently produced hits at home and abroad. Income from Sony’s anime work is expected to increase in the months to come, with the latest Demon Slayer movie earning a record 12.9 billion yen in its first 10 days at the Japanese box office. Aniplex also operates Fate/Grand Order, a hit smartphone game that is celebrating its 10th anniversary this year.

US President Donald Trump’s threat to impose a 100 per cent tariff on semiconductor imports and another possible levy on products containing chips weighs on Sony and other hardware makers, however. Sony makes camera sensors for Apple’s iPhone and most of its Android-based competitors. The declared tariffs, if implemented, may force a rejig of supply chains with far-reaching implications for exporters around the world.

Sony’s PlayStation unit is promising to focus on profitability and to rein in marketing costs for hardware. The company’s in-house studio will release Ghost of Yotei, a sequel to Sony’s hit game Ghost of Tsushima, in October which should contribute to beefier sales during the year-end shopping season.

Meanwhile, the company’s image sensors business faces weak handset demand as well as seismic shifts in the supply chain. BLOOMBERG