Japanese manufacturer Sony reported healthy growth from its smartphone business in its earnings for the first quarter of its financial year. Sony shipped 9.6m smartphones in the quarter ending on the 30th of June; up 30 per cent year-on-year. In addition to increases volumes, Sony also managed to increase the average selling price of its handsets; hitting an all-time high for the company at 29,735 yen (€244). The company's Mobile Products and Communications unit reported an operating profit for the first time since the consolidation of Sony Ericsson.
For those in the second tier of Android manufacturers, life in Samsung's shadow is tough. The early Android leaders HTC and Motorola have both fallen on tough times with shipments declining steeply. Profit has been even tougher to come by with Sony and LG regularly reporting losses from their handset businesses. HTC expects to report its first ever loss-making quarter in Q3 of this year. Motorola is by far the worst performing financially; reported operating loss of more than 23 per cent in all of the four quarters since its acquisition by Google closed.
Since the consolidation of Sony Ericsson into Sony, the Japanese company has made no secret of its plans to make the smartphone business a key part of its overall hardware portfolio going forward. Smartphone shipments have grown strongly since 2010 and the company wound down its non-smartphone business in 2012 during its merger with Sony Group. This transition proved expensive as Sony's Mobile Products and Communication group reported an operating loss of 97.2bn yen (€913m) in its last financial year (April 2012 to March 2013).
The Sony Xperia Z was released at the start of the year and it was arguably the first device designed entirely since Sony took complete control. The device can be credited with the turnaround in Sony's mobile business. The stylish flagship product was very well received. Not only has smartphone shipments for Sony, but the increase in average selling price points to a shift towards high-end products such as the Xperia Z.
Recovering profitability is also a major milestone for the mobile segment in Sony. Given the financial struggles of many of its competitors, simply being able to turn a profit should ensure survival. Many of its fellow Japanese players have already exited the handset market; Mitsubishi, Hitachi, Toshiba and most recently NEC and Casio. IHS expects further consolidation in the wider handset market, as the smartphone market matures and scale becomes increasingly important. While Sony have the stated aim of becoming the number three smartphone vendor in the world behind Samsung and Apple, it will be difficult to overtake the larger Chinese brands Huawei, ZTE and Lenovo without competing at much lower price points than the Xperia Z. This would cause a significant drop in average selling price which would put pressure on Sony's supply chain management and manufacturing processes to remain profitable.
As part of Sony Group, the mobile business has financial security but also ready access to excellent camera technology as well as its own semiconductor facility. It also has the ability to leverage Sony's music and games content though as yet Sony Mobile has not worked out the best way to do this.