Sony Group Corporation (6758) Earnings Call Transcript & Summary

[Presentation] So it is 9:00. So we would like to begin the IR Day for Sony Group Corporation, and we'd like to start the second day program. My name is Hayakawa, in charge of Finance and IR, and I also ought to serve as a moderator today. And today, we plan to have the sessions for Electronics Products & Solutions segment and Imaging & Sensing Solution segment and Financial Services segment. In each segment, after the video presentation by the segment leader, we receive the questions from the investors and analysts preregistered. Those who are preregistered among the investors and analysts, please call the number which was given to you before. And when you ask the questions, please use the language that you registered with. And there is a case that the interpreting will be come in, so please understand it. So those who have not been preregistered yet, you are able to listen to questions and answers through the web streaming. So now we would like to begin the session for Electronics Products & Solutions segment. But first, we would like to show the presentation video by Mr. Kimio Maki, the Representative Director, President and CEO of Sony Corporation.

Hello, everyone. I am Kimio Maki, the President and CEO of Sony Corporation. I would like to explain the EP&S business. I would like to explain EP&S business direction, core businesses, growth businesses and mid- to long-term business exploration as well as our efforts in the area of sustainability. First, I would like to talk about our corporate direction. Sony's purpose is to fill the world with emotion through the power of creativity and technology. Based on this purpose we established our vision as continue to deliver Kando and Anshin to people and society across the world through the pursuit of technology and new challenges. We aim to advance our businesses even further under this vision and reach the corporation direction of creating the future together along with a variety of creators. The 3 operating companies in the EP&S business used to operate autonomously while cooperating with each other. From this April, we have integrated them into 1 operating company, Sony Corporation. That further optimizes our organization and our human resources while facilitating the sharing of technology and collaboration between business groups. Additionally, we will aim for the integrated digital transformation of common platforms in executing the company-wide strategy. Sony Corporation is comprised of variety of businesses and multiple common platforms that's both these businesses. We recognize that our touch point with the wide variety of customers across our diverse businesses are one of our greatest strengths. We aim to enhance our technical capabilities and creativity through horizontal cooperation across our organizations, including through the sharing of the communication technologies in our mobile communication business with our other businesses. Through these efforts, we aim to create new values that exceeds the imagination of our customers. We anticipate that all our steps are business environment including politics, economy, society and technology will continue to change in fiscal year 2021. The breadth and depth of the impact of COVID-19 has been considerable. On the other hand, new lifestyles, work styles and changes in customer behavior have raised expectations for new social and technological innovations. And these changes have created various business opportunities such as in the remote solution and cloud services fields. In this rapidly changing environment, I believe that it is important for management to have the desire to constantly evolve. In such a business environment, we will position profit and growth as our 2 management axises. We seek to maintain profitability by further strengthening our core businesses, and we aim to create new businesses through our growth strategies. On the profit axis, we will further strengthen operational capabilities and high value-added products in our core businesses. At the same time, we will proactively explore new business areas and growth opportunities, not only by integrating the business and technology assets throughout the Sony Group, but also by looking outside of Sony and collaborating with external partners. We see sustainability as an important priority for our business, and we'll take action to make it as foundation of mid- to long-term growth. Now I'd like to explain the core businesses, which are our current pillars of profitability, including televisions and audio, imaging, mobile. Looking back on our -- the steps we took over the past 3 years, I would like to emphasize 3 points. First, amidst all of the constantly changing business environment, we thoroughly strengthened our operations and created structure that generates a profit without having to attain the large scale. Second, our ability to turn the Mobile Communication business from a loss into a profit helped improve the profitability of the EP&S business overall. Mobile is important for the future because it plays a critical role in connecting people through wireless communication technology. And third, we listen to the voices of our customers and aim to develop attractive product that exceeded their imagination. We also started to expand our business areas for future growth. COVID-19 quickly spread all over the world in fiscal year 2020 and affected all aspects of our business, including manufacturing, distributions and sales. While there was a global shortage of components such as semiconductor, we responded quickly and minimized the impact on our business. We engaged in remote work and implemented remote manufacturing and automation activities at our manufacturing sites overseas. As a result, we were able to develop and introduce products in all our categories that were appreciated by customers. Lastly, we were able to promote our profitability by generating cash flow in a stable manner and increasing the amount of profit generated. In terms of our operations, we will continue to evolve to keep our business stable as the environment continues to change. As for the procurement of components that ensured supply, such as semiconductors, we will collaborate across the Sony Group and secure strategic inventories through cross-business efforts and predictive management. Regarding manufacturing, we will build structure that can flexibly respond to the environmental changes. This is a video of our TV production line at our factory in Malaysia. We will further promote automation such as this in our manufacturing operations. On the sales side, we will further strengthen data-driven digital marketing. As for digital transformation of common platforms, we will collaborate within the Sony Group, including with Sony Interactive Entertainment, which is leading in this area. We will further improve profitability by evolving our end-to-end operations, controlling fixed costs and increasing the added value of our products through collaboration across the businesses. In the midterm, we aim to achieve an operating profit margin of 10% in the core business areas of this segment. We will also invest in growth businesses and accelerate preparations for midterm growth. Next, I would like to talk about 2 examples of the expansion of our core business. Measures to mitigate COVID-19 have led to restrictions on video productions that involve large gathering of people. And demand is growing now rapidly for video production in virtual environment that look real. We will further evolve content creation in virtual environment by leveraging our technology collaboration between our highly acclaimed professional equipment such as VENICE cinema and Alpha camera and our Crystal LED displays that crisply reproduce reality. We will develop production workflows with other companies within Sony Group, such as Sony Pictures and Sony Interactive Entertainment with the creators themselves and with distribution platformers and other technology partners. We will foster demand for large-screen displays, not only in the area of content production of movies, television shows and games, but also in places like corporate showrooms. In the video production industry, opportunities for creators to demonstrate their creativity are increasing. In the B2B area, we provide software development kits to customers who want to incorporate cameras into their services and systems. For video creators, we will provide a service that enables easy-to-use editing and instant delivery over the cloud by leveraging the metadata generated by cameras. In addition, we have developed a system that transfers captured videos at high speed via 5G by connecting our professional cameras and Alpha cameras with Xperia Pro. As such, we are making strides in the field of data transmission, including live broadcasting. We have already achieved results at global sporting events. We view this as an area of further expansion in the future, and we will promote collaboration and co-creation between the imaging and mobile businesses. Sony connects with people all over the world, through Kando content and we aim to support the video creators who create Kando content. We will develop technologies to further expand the communities of interest, which connect creators and users all over the world. Next, I would like to explain our growth businesses and our mid- to long-term growth. First, I would like to talk about the direction of our technology development, which is a source of new customer value. Customers' value is changing rapidly due to such things as a swift transition to a data society, more remote lifestyles and work styles, evolution in the life science fields and changes in people's movement. In order to respond to such changes will make a business out of our differentiated real-time and remote technologies by combining our rapidly evolving communication technology and data processing technology with the reality rendering technology that we cultivated in our core AV business. I would like to touch upon 3 example of business development that use this technology. Hawk-Eye with its real-time visualization technology contributes to the improvement of fan engagement as well as the fairness and safety. Data use is also expanding rapidly in the sports area. Since the 2020 season major league baseball in the United States has introduced play analysis that uses Hawk-Eye's bold and player tracking technology in all its 30 stadiums. In addition, we have contributed to the holding of events such as the U.S. and Australian Open tennis tournament without line judges thanks to the adoption of Hawk-Eye Live in the future, we will not only contribute to the game management, but we will also offer coaching that uses data on player movements and ball trajectories captured by multiple cameras. And we will provide services for viewers and fan engagements. Lastly, we will take on the challenge of creating new sports entertainment, such as video virtualization based on analyzed data. Network solutions are important because they provide Anshin by connecting people to people remote. The number of subscribers to NURO, our optical fiber line server, is one of the highest for an independent telecommunication carrier. And NURO is highly rated in customer satisfaction surveys. Because the demand for online content has rapidly increased during the COVID-19 pandemic and remote work is becoming more commonplace as a new work style, we are gaining subscribers in the corporate domain as well as individual customers, thanks to the high quality of our product. We aim to further expand our service area in Japan over the midterm. In addition, we'll accelerate the growth of our smart IoT solution service that enriches the lives of our users. We have introduced flow cytometers used for life science research into the market, and they are being used for research and development at premier medical institutions and research facilities. I believe that research on precision medicine, including cell therapy, will continue to evolve in the future. We will contribute to society in the life science field by generating detailed cell information via core technologies such as micro fabrication, optical and laser technology, signal processing analysis technology and molecular synthesis. Now I would like to talk about mobility as one of our exploration activities. We believe that our contribution to the safety of mobility will help mobility evolve into a new entertainment space. We are trying to develop an optimal mobility experience by leveraging the wealth of technology we have accumulated in our audio and visual space and by leveraging our display technology that render the all kinds of content. As 5G becomes more widely used, mobility is expected to be one of the key beneficiaries. We are exploring whether we can create opportunities to contribute to the safety of mobility through the 5G communication and antenna technology that we have cultivated in our mobile business. To explore areas of further growth over the mid- to long term. We have established a new business and technology development group that will coordinate our collective effort across all of Sony Corporation. We intend to create business opportunities not only through the integration business and technology assets throughout the Sony Group, but also through proactive collaboration with partners outside of the group. Lastly, I will discuss sustainability efforts. We believe that managing Sony Corporation in a sustainable way is crucial to our future. Among the many sustainability issues in the world today, our focus is on the natural environment, diversity and inclusion and accessibility. Regarding the environment, Sony Group as a whole is implementing a long-term plan called Road to Zero, which aims to reduce our environmental burden to zero by 2050. Sony Corporation has enormous responsibility. When it comes to achieving this target, in addition to accelerate our efforts to introduce recycled plastics and reduce the power consumption of our products, we try to avoid using plastic in our packaging of small-sized products. Furthermore, regarding the introduction of renewable energy, we are accelerating activities such as the planned installation of solar power generation at [ Kuda tech ] in IT Prefecture and our factory in Malaysia, and we expect to achieve 100% renewable energy use at the new Minato Mirai office in Yokohama. Diversity is the common value that the entire Sony Group cherishes. And it is also very important for Sony Corporation since we aim to create the future together, reflecting different opinions that arise from diverse values and taking on the challenge of creating new value as Sony's DNA and a source of our innovation. We will strengthen activities related to diversity and promote the fostering of the corporate culture in which employees with diverse backgrounds can fully utilize their abilities. Furthermore, people are the subject of Kando and Anshin. We aim to overcome through technology the restrictions on people brought about by age, the state of their bodies and their environment. Through an expansion in our activities in the accessibility space, we hope to realize a future where everyone can share their emotions through Sony's products and services. Please watch this video that summarizes our initiatives and the directions I explained today. Thank you for your attention. [Presentation]

So now we'd like to move on to the question-and-answer session. And those who answer your questions are Mr. Kimio Maki, Representative Director, President and CEO of Sony Corporation; and Mr. Kazuo Kii, Executive Deputy President; and Mr. Yoshinori Matsumoto, Executive Deputy President and Mr. Yuichi Oshima, Senior Vice President and CFO.

[Operator Instructions] The first question, BofA Securities, Mr. Hirakawa, please.

My name is Hirakawa of BofA Securities. As for the growth area, I have 2 questions. And today, for the life science, you made presentation on life science. In an IR Day previously, at the life science, it was explained to us and for the medical area. And as a medical area, what is your profitability, the situation of the medical business? And the second question is the life science area. What is the size of your target market? What is your projection about the market that you project for your own business? Please.

Hirakawa-san, thank you very much for your question. And so your questions are life science. As a medical area, what is the present status of the profit level? And second question is, in the life science or the growth area as a whole, what is the size of market? So that is a question pertaining to the size of the market. And the first, the question, in a medical area, as for the concrete figures, we do not disclose numbers. But in order to support medical business, for instance, printers, the monitors and those technology has been developed in a very smooth manner. We're able to develop the business very smoothly. And with Sony Olympus joint venture. And the business, it has been quite solid to produce a good level of profit for FY 2020. And in the life science arena, last year in summer, ID7000 equipment was introduced to leading institutions in the world. And for the sales and shipment, they have been quite smooth. And answering your second question, it is related to the second question. And in the Life Science business, we are currently the -- cancer, the immunology therapy, and there is immense possibility for the market. And so for the future, we believe that this is quite promising in order to develop our business further. And therefore, in our business, we define this as one of the growth of the businesses, and we'd like to focus our development efforts in that area going forward.

We introduce the next one, Ms. Nishimura of Crédit Suisse.

I have 2 questions. The first point is this your business area of the mid- to long term, what is this top line that you have set as a goal, especially in digital camera? You have a competitor and the others are emphasizing. So competitive environment is changing for digital camera in other areas. The second question is solution related to business sales revenue and profit. In the core growth target area is the basis, but what's your plan for the expansion? R&D cost is likely to go up as well in that exploration. So these are the 2 parts of my question.

Thank you very much for your questions. Let me summarize the answer. The core business domain, what is revenue targets in mid- to long term, especially digital camera and competitive environment is changing? And how are we ready to cope with that. The second is the solution-related products sales and profit. What the status quo of the future change? Do you expect that R&D cost will also increase? As to the core business, the first question, specific, the figures are something, that I cannot disclose for the time being. However, within the core business domain, as I explained to you earlier, the virtual production and the large display technology as well as software development kit, SDK, and cloud service, 5G, digital communication and the linkages, these are the business areas where we can expect to expand. That is -- those are the driver for the future growth as the digital still camera. And then another growth area Hawk-Eye is something that the sporting business for visualization. And then of course, NURO is a very important network technology, optical fiber line service it's a network solutions. And as I said earlier, that this life science R&D. Flow cytometers is an important life science business. So these are the very important areas. So we expect the growth in those domains, and we'd like to give the emphasis on those potential areas. Turning to digital camera, what about the competitive environment. In terms of digital SLR, this industry sector is about to go down. But by using mirrorless, the camera business in the area is expanding, the market size is expanding in the mirrorless application. And in that context, full frame is a most high value-added segment. We are the #1. We have a #1 share in that segment. And then there are other major competitors who are likely to enter. But in the mirrorless, the market is quite activated. So that even though the other competitors enter, they will further stimulate and activate the market itself, I believe so on behalf of Sony we take the competitor's entry as something positive. The second point is a solution-related revenue and profit. What's the current size? And what is the future scenario? For example, there are 2 examples, sports area. Sports business first time being Hawk-Eye is a representative product service. In sports, it's used for the judging. So that is like a line judges and other can use. In addition to line judging and other judging, but for the players, we have a tracking data or the player behaviors, which will be placed and maybe put it into the virtual of the system. It could be useful this broadcasting as well. So that's the future plan obligation of Hawk-Eye and other technology. And second point is network solutions business. At present, there domestic subscribers and contractors and about per annum 40% annual growth is expected. So in the future, to this area, we continue to invest. It's not a big investment. We continue to make steady investment because we'd like to nurture this particular segment in general. Thank you. That's our plan.

So we would like to move on to the next question here from JPMorgan Securities, Mr. Ayada.

I have 2 questions. The first question is that as for the core business, you talk about margin of profitability, 10%. That's what you aim at mid to long term. But by category, switch product, the category, service category, There is a great room for profitability improvement as the factors for that, though, because of the increase in added value or because of higher efficiency, better mix of products. And for the value-added enhancement, if there is any concrete example, please share that with us. That is my first question. The second question is that And for the growth business or exploration area for the selection of them? And what is your view about this model? Is there a business model that you're always conscious about, mindful of the rather than selling the product the stand-alone, B2B or solution should increase in terms of percentage or recurring business model is what you aim at? In that case, the operating margin or ROIC. And I think the KPI type of selection may differ. So what is your view about business model?

Thank you very much for your question and the concerning the questions. The first one is the operating margin of 10% to do that. What kind of category as the service area, there is a room for improvement. Is it because of the added value enhancement, if there is any tangible example to share with you. That's your question. Second is in the growth area. How we should be mindful of the business model in a growth area? So for the -- how to record the profit, I would like to ask Mr. Oshima to give supplementary comment. But the first point and second point, the first part, I'd like to cover your question. And for the core business, in order to aim at the margin of 10% and higher. And for the each category, what kind of percentage should be given, I refrain from giving you the details. But for core business, going forward, we will -- we do not see efforts to improve the profitability. And this operation, which is our strength, will be further strengthened. And as shown in our video, that was the productivity we will promote the automation and for the X. We would like to have a higher efficiency in order to strengthen our operational capability. And for the increased product appeal for each category, we would like to create more attractive products. And within core the businesses. And we would like to increase the number of different kinds of businesses. What I explained the show the 5 domains. And first, digital production. And under the COVID, the production activities have been restricted. And so virtual production is important. And second large display to be used, so B2B business. And in imaging, the area, from diverse customers, they asked us to disclose API and therefore, the software development kit should be provided on a contract base or subscription base. And that's what we have already started. And secondly, we already started this project. But by using cloud and the creator's activities move from the file base to IP base, and this is quite the salient trend. And so in a cloud space, tools should be provided so that they're able to create a cloud environment down to the distribution. That has started in a B2B service. And lastly, likewise, by using 5G, the image which is captured is sent immediately to editing the space. That kind of a solution has already provided. In major events, those have already started. And this is related to #2. As I explained, it is not the box type or sell-through type, it is more of service-type or solution-type business. So based on the contract with the customers or on a subscription basis, those are the products offered to the customers. And so we'd like to increase the share of this type of business going forward. And regarding details about the numbers, Mr. Oshima will give supplementary comments.

As for the figures about KPI, I would like to share them with you. And as a total, the operating -- the profit margin has been used as a KPI. And rather than recklessly pursuing the scale, we try to aim at high valid -- added value. So that is the way to increase our corporate value. And sharing the same KPI, among the Sony Group, we are able to aim at the same understanding. For recurring and subscription model, we'll increase in the service. So in that process, the internal KPIs have been used. But the lifetime value is a very important concept we need to cherish. In Sony Network Communication, for instance, they use network solution business, and that concept there that should be introduced to the groups, which have followed the traditional way, EBTDA or ROIC. And so they also take into account comprehensively in order to accelerate the future growth and also to manage the return on the investment. So internal operations should be well coordinated in that regard. Thank you.

So we'd like to entertain the last question of this session since time is short. Mr. Nakane-san of Mizuho Securities, please.

I'm Nakane of Mizuho. I have 2 parts of a question. First is R&D, to this Matsumoto-san, which is a new area, new domain, what kind of area you'd like to explore? And the collaboration among the group companies, like AR and VR, these are the areas for us and so on. So that I think you can have a supply amongst the group companies in the audio. And related music-wise, you could also have the other collaboration from this group companies. So that's the first question. The second, in Page 14, strategic procurement will be strengthened specifically. How the organization stages? And what are you doing? What's going to be changing in your organization? Because the problem here is that in terms of EPS, it's not unified, but SIE, with regards to Mr. Oshima-san's I&SS, how do you collaborate with all these different domains of your company, like as a semiconductor? In Japan, that you have the important customer. So among the group companies, how do you specifically promote your collaboration? If possible, Mr. Maki could tell us about this strategy and about the retail management. What is upside of the growth that you are expecting? Maybe Mr. Oshima could comment on those points.

Thank you, Nakane-san, for your question. Because the points -- the first question is R&D. What is the new exploratory area -- new area? And what is a possible application Sony Group companies -- the application. The second one is procurement-related issue. As to the first question, I and Kii will respond as you nominated. As to the latter 2 -- second question, Oshima will respond. The first point of your question that today, as we presented the core business today, of course, we are planning to have a certain 5 areas or domains that we would like to emphasize for deployment. The first is that virtual production and the larger display could be applied to B2B. And in the imaging area, software development kit, SDK, will be offered. The second point is that a cloud solution will be offered. The third point is the telecommunication and that will be merged as a solution to be offered. So in that context, especially group collaboration will be -- is implemented in the market today. The virtual production is the area. Virtual production currently is involving the Sony Pictures as well as external, the distributors as well as the production, manufacturing and production companies. So all those parties are now collaborating. As for the details, Kii will give you the details.

Thank you for your question. As to the virtual production, I, Kii, will give you some supplementary remarks. So far, we has been selling mostly the stand-alone hardware product. But we wanted to get away from that traditional business model that has been the difficulty. But in terms of virtual production, the new potential examples because in order to realize virtual production in another section, the large size LED monitor is being developed. But in addition, the shooting camera and all these devices and equipment, the area where Sony has been the strongest, that's our strength. But in addition to that strong area, the equipment and devices alone do not have to be perfect but we need something else. Producers, the people, their workflow needs to be understood so that some of this -- the inefficiency can be eliminated. Like, amongst these displays, like camera and display, their interference should be minimized and eliminated. So for the sake of the customers, better efficiency should be pursued by us, that's a strong point, a crucial point, then production systems and partners. And we need to further collaborate through a good system of collaboration, so everything will work out smoothly. So we are the ones who are capable of doing that. So this is a area, strong area, that we have to really roll out. Thank you.

So to respond to the question on procurement, let me respond and explain. Last year, due to the corona pandemic, different impacts were posing in the supply chain. Lots of problems were identified. We had to overcome all those supply chain bottlenecks. And in terms of procurement and actual sales, yes, it should be connected in one continuous way. So we have developed that unified operation. Like, the procurement ambitions were given to the salespeople and the sales direct information will be given to the procurement department. It should be continuous flow. And because of that, we have really enjoyed the good profit as well as the revenue increase. So the parts and components as well that we faced with drastic change of the environment and that situation still is continuing. But in terms of this -- of course, in April, we established a Sony Corporation. And then the procurement center will be led by Kii, and then we are rolling it out, the procurement center. And then according for each division, it is a vertical procurement sort of a standalone or maybe silo. But now we are unified as this unified procurement center of Sony Corporation. For each set of the devices, we have the horizontal corporation, like semiconductor and the parts, and then electronic parts and components and so on and so forth. So it's an end-to-end operation, unified as the Sony Corporation. Together with the partners, we can really negotiate because we are bulk purchaser. And then very quickly, we collect information. So that strengthened information, including sourcing intelligence as well. So that's the kind of activity within the Sony Group companies, like PlayStation team and then sourcing teams, the semiconductor procurement teams, all these group companies sections that we are collaborating now. And in addition, in terms of supply chain, but supply change should be handled more flexibly, so that company-wide, more automated activity is now promoted. Last year, we had some difficulty. Because of corona pandemic, some of the operators, well, could not be really recruited and then we could not really produce continuously. So process needs to be standardized. So any place at low cost, very speedily we can manufacture and produce. So that kind of end-to-end operation and united operation will be promoted further. Thank you. That's my answer.

So Matsumoto would like to add to respond to the first question by Nakane-san, that is to say, in the future, what are the new business areas and what are the key factor of technology as Maki-san explained it. Three will be our focal points. So that in that sense, corona pandemic is an issue we have to take into account. And communication means will be different. That's something we face with AV and through a group collaboration was done. So that more remote reality in real time. All these technology, 3 Rs will be a focal point and new customer values will be further created based upon the 3 Rs: reality and so on. So in addition to the virtual production, we could do more things in those areas. Thank you.

Since time runs out, we would like to bring to an end the session for EP&S. Thank you very much for your attention. Next session will begin at 10:00. Next session is about I&SS And this session will begin at 10:00.

It's time to start the session on the Imaging & Sensing Solutions. Please watch the presentation by Representative Director, President and CEO of Sony Semiconductor Solutions Corp, Terushi Shimizu.

Hello. I'm Terushi Shimizu from Sony Semiconductor Solutions. I will explain about the Imaging & Sensing Solutions segment. Here is today's agenda. First, I will discuss the business direction of I&SS This is our long-term business strategy focused on 2025. I showed this at the IR Day in FY '19. This is the latest update. There are no major changes to our long-term business strategy. We will continue to aim for growth in both hardware and software. However, as is written in red, there are some minor changes. As for the market environment, the mobile image sensor market has undergone significant structural changes due to COVID-19 and last year's friction between the U.S. and China. In addition, the full expansion of mobile sensing that we had anticipated has not come to pass. However, we believe that it will return to a growth trajectory in the midterm. As for hardware, we need to make careful decisions regarding investment while assessing demand trends, but we intend to remain #1 in imaging and achieve #1 in sensing as targeted. As for software, we are currently preparing our partner strategy. Our mid- to long-term direction of pursuing a recurring revenue model by combining Edge AI processing with sensor hardware has not changed. Next is the business environment. This shows an update of the worldwide image sensor market on a revenue basis. First, I will discuss automotives, which is in the new area part of the slide. Higher unit sales are expected to decrease due to the impact of COVID-19. But the market for Level 2.5 ADAS cars, which have many cameras is expected to increase. Soon after the outbreak of COVID-19, we forecasted that it would take the automotive market 6 years to recover to the same level as 2019. But we have been positively surprised as to how quickly the market is recovering, especially in China. Although there is a shortage of automotive semiconductors, we believe that the market will gradually recover. COVID-19 had limited impact on factory automation. It is expected to grow over the mid to long term due to manpower reduction efforts as well as investments in 5G and remote technologies. The same is true in the security area. The market is growing steadily due to higher infrastructure investments, including measures against COVID-19. In the mobile area, the market for mobile imaging will be flat in the short term due to the impact of COVID-19 and the friction between the U.S. and China. But there is no change to our view that market will grow in the mid- to long term. Mobile sensing has stagnated due to a lack of applications. It will take a few years to see full-scale expansion. In the AV area, COVID-19 has caused a shrinkage of the market to accelerate. Although we are pleased to see some recovery in the high-end mirrorless camera market compared to the situation immediately after the outbreak of COVID-19, we do not expect it to recover significantly in the future. At the IR Day in FY '19, we set a target of increasing a proportion of sales generated by the sensing business to 30% by FY '25. As I explained earlier, the current situation is that mobile sensing, for which we have particularly strong expectations, is stagnant due to a lack of applications in the market. Depending on future market trends, the timing of achieving our goal might have to be revised. But at this point, the target remains unchanged, and there is no change in our plan to continue expanding the sensing business in a variety of categories. An important determinant of the growth of mobile sensing will be how quickly an environment can be created around the world in which developers can easily create applications. The growth of our time-of-flight sensor business will be dependent on that environment. So we will closely watch developments in that area. In the industrial area, we are expanding our lineup of various sensing devices that can capture invisible light, such as wire sensors that detect an infrared. And we anticipate the future business growth, especially in the factory automation field. We also think that automotive and solutions businesses will make a significant contribution expanding the sensing business in the mid to long term. Our primary business, mobile image sensor, recorded its highest profit in FY '19. Then in FY '20, it was significantly impacted by the change in the market environment. Nevertheless, the recent market environment is recovering compared to right after the environmental changes. Although we will not grow profits in FY '21, we believe it will be a very important year for the recovery of growth in FY '22 and beyond. To that end, we deployed 3 key strategies. First, we will continue to promote the diversification and expansion of our customer base. Second, demand from smartphone makers for high image quality in their high-end models is increasing after a temporary decline in the high-end market due to structural changes resulting from the friction between the U.S.-China last year. Taking advantage of this opportunity, we will develop high image quality and multifunctional sensors. Lastly, in response to expansion of the mid-range market that began last year, we will accelerate the development of smaller pixel product for which demand is increasing. We plan to beat the competition by differentiating with new technologies that improve the functionality and characteristics of our sensors as well as through miniaturization. Next is the automotive area. The purpose of pursuing this business is to create a safe, secure and comfortable future for mobility. To achieve this, we will deploy 4 key technologies. We commercialized our first automotive image sensor in 2014, and the business division was established in 2016. The figure on the left shows the trend in sales since the establishment of the business division. The average annual growth rate was 50% through FY '21, and further growth is expected toward FY '25. In addition, as is shown in the figure on the right, in recent years, the performance of our image sensors has been highly evaluated, both in Japan and overseas. And the number of OEMs that have adopted them in FY '20 was about 4x higher than when the division was established. We have also raised our presence in the industry and have built good relationships with a variety of customers and partners. We expect the number of OEMs adopting our technology will triple by FY '25, and we expect demand to come from customers all over the world. As I mentioned, the Image Sensor business is expected to continue to grow in the mid- to long term. Our revenue share decreased in FY '20 compared to the previous year, but we expect the business to grow going forward. And thus, we are maintaining our goal of achieving 60% in FY '25. As the business grows, we will also increase capital investment. We decelerated our investment in FY '20 due to uncertainty around market trends, but the current market environment is recovering. As FY '21, we plan to increase our investment to meet demand from FY '22. Therefore, the total investment over the 3 years of the new mid-range plan through FY '23 expected to exceed that of the previous mid-range plan. However, when we look at the individual years, we expect investment will peak in FY '21 and will go down slowly from FY '22. We also aim to generate cash flow as was written out in our long-term business strategy. The new fab at our Nagasaki Technology Center, called Fab5, has started operations since April. Even during the difficult business environment last year, we were making preparations for future growth in demand. We believe that this is a major step toward returning to growth from FY '22. In addition, construction has begun on further expansion of Fab5. We will continue to invest while carefully monitoring demand trends. As for our return on invested capital, we have not changed our target of achieving 20% to 25% in FY '25 despite the impact of the changes in the business environment. In FY '20, ROIC decreased significantly compared to FY '19, resulting in 11%. I would explain the road map to achieve our target. Before FY '22, asset turnover is expected to increase slightly due to an increase in sales, resulting from higher demand. While profit margin is expected to decrease due to deterioration of the product mix in the mobile area. From FY '22, we expect the return to a higher added value product mix and as investment decreases. We expect to improve our profit margin by decreasing the ratio of depreciation to sales and further increasing our asset turnover due to the decrease in capital investment. We continue to view ROIC as our most important key performance indicator. And despite the severe business environment, we plan to manage our business so that it consistently attained a higher level comparable to that of the best companies in the semiconductor industry. Next is the solutions business. In May last year, we announced the world's first intelligent vision sensor equipped with AI processing functionality. Using our stacking technology, we embedded AI processing functionality into the logic chip in our sensors. In the 1 year since this announcement, we have received 280 inquiries from a variety of industries. Currently, we are engaged in commercial negotiations with 54 parties, and I have confidence that this business has potential. Of the 54 negotiations, 10 are with end-use customers. While the rest are with partners such as camera, OEMs, [ SIEs ] and software vendors. Most of the end-user customers are in the retail industry, which is our primary target, but there are also customers in the factory automation and smart city areas. Today, I would like to introduce some concrete examples or business negotiations. First, I will explain about a major domestic retail customer. This customer aims to provide a new customer experience through the use of smart cameras, including cashless payment without cash registers. To do that, they need the capability to detect abnormal behavior to prevent shoplifting. But since there is limited space to install cameras, fact that multiple cameras with this similar AI are needed to perform functions is a problem since it increases the cost. Utilizing smart camera equipped with our IMX500 sensor solves these problems. Since the IMX500 can select and switch the type of AI, it's used to address a required application. The same type of camera can be used for various purposes in venues where the number of cameras installed is limited. Furthermore, since the camera itself does not require external memory or high-performing processors, it is smaller and reduces cost. Next is an initiative to create a smart city in Rome, Italy. From June, the city of Rome is going to start proof-of-concept activity using smart cameras equipped with the IMX500 to address social issues in their city. Urban area traffic congestion and pollution have become serious issues in Rome, and the primary cause is drivers trying to find parking spaces. In addition, during the COVID-19 pandemic, frequently, overcrowded buses became a major issue. And there are many traffic accidents caused by pedestrians ignoring traffic signals. The city of Rome wants to solve these problems using smart cameras equipped with the IMX500. When it comes to parking, which is the cause of the traffic congestion, a local vendor developed a smart parking system that notifies drivers in a timely manner through a dedicated mobile app when open parking spaces are detected by smart cameras. This enables early detection of parking spaces and can reduce traffic congestion. As for bus overcrowding, bus operator is benefiting from early detection of congestion at bus stops using smart cameras to notify drivers so that overcrowding can be prevented and the buses can be operated more efficiently. As for pedestrians ignoring traffic signals, it is possible to prevent accidents by detecting these people and eliminating them with the light to draw attention for drivers. These advances were made possible because the IMX500 equipped smart cameras can output metadata. They do not transmit outside the sensor any personally identifiable information, such as car license plates or head shots, which enables them to operate in a way that respects the privacy of citizens. We expect that official operation will begin after the results of the proof-of-concept activity. Now I will discuss an example of using the IMX500 in combination with augmented reality maps. The AR map solution for retail is being developed in collaboration with Sony Music Solutions, a retail space construction company that is part of the Sony Group. Due to the recent trend of online shopping and stay-at-home activity due to the COVID-19 pandemic, the retail industry needs to improve the customer experience at physical stores and increase the value customers perceive from going to those stores. AR maps are attracting attention as a potential solution. By superimposing AR content on the physical store itself via mobile devices, we can provide a new customer experience that has never been enjoyed before. We're also considering the integration of smart cameras equipped with IMX500. Thanks to the high-speed HAI processing and the metadata output of the IMX500, we can display customized AR content for each customer in real time. This enables us to provide further value, such as displaying AR signage, tailored to customer preferences and orientations and new customer service experiences by displaying product information on AR. Through cooperation with Sony Music Solutions, which has expertise in retail space construction, I believe we can demonstrate synergy unique to the Sony Group and contribute to the creation of new customer experiences in the market. Due to these efforts, we're receiving strong inquiries from the market, and I believe the solutions business can grow over the mid- to long term. We plan to move quickly to start generating sales even if on a small-scale and intend to accelerate the business going forward. Finally, I would like to explain our environmental initiatives. The Sony Group has established a 'Road to Zero' plan to eliminate Sony's environmental impact by 2050, and all parts of the group are enhancing their efforts in this area. Among the businesses within the Sony Group, I&SS consumes a lot of energy due to the nature of our business, which includes manufacturing. Therefore, we have a lot of responsibility when it comes to environmental issues. And we believe that our efforts will greatly contribute to the achievement of the goal of the entire Sony Group. In the I&SS business, we have 2 primary environmental initiatives. First is the development of environmentally friendly products. The Intelligent Vision Sensor I mentioned earlier is an example of this type of product because it can only output metadata. The amount of data produced and sent to the cloud is reduced, resulting in a lower power consumption. We aim to continue to produce products such as this that contribute to the environment through the power of our technology. Another initiative is our work to reduce environmental impact of our semiconductor manufacturing. For example, at Nagasaki, Fab 5, which recently started its operations, we have reduced power consumption of the clean rooms by 30% compared to conventional fabs through highly efficient operational control of refrigerators and utilization of waste heat. According to our estimates, this amounts to an annual reduction of 5,900 tons of CO2, 17 gigawatt hours of electricity and JPY 220 million of cost. Along with energy conservation, we are focusing on the introduction of renewable energy. Although its share of total energy consumption is not yet large, we plan to increase to about 3x that of FY '20 the amount of renewable energy used in our manufacturing activities across the I&SS business in FY '21. In Japan, solar power has been used since March 2019 at Building #1 of our Kumamoto Technology Center, and we aim to start using it at Building #2 by the end of FY '21. In the mid- to long term, we will work to further expand the solar power usage at our domestic fabs. We plan to install solar power at Nagasaki's Fab 5 and at our Oita Technology Center in 2024 and 2025. Overseas, where the cost of recurring renewable energy is lower than in Japan, we will use that kind of energy from an early stage. At our fab in Huizhou, China, we have already achieved 100% renewable energy usage with an environmental certificate in FY '20. And we plan to introduce solar power in an environmental certificate at our fab in Thailand in FY '21. As a result, our overseas fabs are expected to use 100% renewable energy by the end of FY '21. Environmental initiatives are an extremely high priority for us, and we will continue to focus on and strengthen them. As I have explained, last year was a difficult year due to changes in the business environment. However, our long-term business strategy does not need to change significantly, and we aim to accelerate our business without changing our targets. We plan to make FY '21 the year of our counterattack. The changes in the business environment last year were not temporary, and we believe that speed of change around us will continue to accelerate. We aim to be a strong company that can grow in the future by always being prepared for change and by instilling throughout our organization a survival of the fittest mentality, whereby the player best suited to the environment survives. That completes my presentation. Thank you for your attention.

Now we would like to start the Q&A session. To answer your questions, we have the Representative Director, President and CEO of Sony Semiconductor Solutions Corporation, Terushi Shimizu; and CFO of the same company Yasuhiro Kono. Now let's start the Q&A session. Now let's start the Q&A session.

[Operator Instructions] The first person from SMBC Nikko Securities, Katsura-san, please.

Two questions. First, other than the pixel process, what's your idea? Going forward in the area of sensing, which you are going to grow, logic process and MRAM memory included, the importance will grow. At the same time, right now, you are doing a lot of outsourcing, and there's TSMC's joint venture ideas being reported now. So what is your plan or idea on these matters? Now you talked about the environmental initiatives you have in your presentation. What are you going to do? To what extent by yourself? So I would like to ask your idea on this also. Second question, M&A, your idea on M&A. In the early 2010, facilities-related, the front end processes M&A has happened, tough sensor are there and software companies. You did the M&A in the development process area. But recently, it seems that you didn't do much in this area. So in order to expand your solution business, what is your take on the M&A going forward?

Thank you for your questions. About your first question, especially in the sensing -- well, not only sensing but the process other than the pixel, mainly pixel -- the logic, sorry, what is idea on procurement. And we did some M&As in the past. But going forward, which area are we going to do M&As in. First, not only in sensing, in the -- but the sensors for us. About 90% -- a little less than 90% having been stack factories, we do a lot of procurement from outside. We do have an in-house capacity, but very limited. Now recently, logic capacity, foundries capacity is getting tight. As supply is getting tighter, so we need to make sure that we can procure enough. In the past with the major manufacturers and other logic manufacturers, we try to negotiate with them, presented them with a long-term view. And we should keep the good relationship with them going forward. TSMC's article was reported, but I would like to refrain from making comment on that. But as I said earlier, the long-term capacity of logic to procure it steadily is so important. And in Japan, in terms of security, having factories in Japan will be so nice in terms of the long-term stable procurement. Second question, M&As. In the past, as you rightly pointed out earlier, we did purchase factories. And starting 5 years ago, iToF, Softkinetic was purchased and [ DOBI ], Altair was purchased, and then more recently, [ MIT OCRA ] was acquired. Going forward, M&A's in the growing area while we are exploring the possibility always based on technology. And also, for the expansion of the solution businesses going forward, if there are necessary partners, we would like to be proactive. Thank you.

Now we would like to move on to the next question from UBS Securities. Yasui-san, please.

My name is Yasui from UBS Securities. I also have 2 questions. And on the Page 14, ROIC, 20% to 25%. So when you accomplished this, what is the operating -- the profit margin? What is your estimate? In the past, you accomplished about 20%. With decline of investment, what would be the number? And our expectation and inclusive of the customers' expectation, you try to increase profit margin. So with assumption of the change about the market, whether you have changed this as well. That's what I'd like to know. And second, a bit redundant. Generally, from your percentage the ROIC -- or investment in CMOS sensor, what is ROIC -- the percentage? And for 28-nano, ROIC would decrease? Or can we expect almost similar level of ROIC? Is it change of nano size? So just generally, what is your projection?

Thank you very much for your question. And first, I would like to explain briefly. And then for the follow-up comment, will be given by Mr. Kono, CFO, about ROIC. And first, the target of ROIC, currently by 2025 -- 20%, 25% and profit margin, what would be our projection about the profit margin then? And when I explained before, we focus on high value-added, and that will be a driver for the enhancement. But last year, there was a major change, and so how this will evolve towards 2025. And the next -- also, based on ROIC, for instance, for logic, the 40-nano or 50-nano is a mainstream that in future will change into 28-nano. So what will happen then? And investment in logic, what will be the change associated with that? Those are the questions. And the first point, at this moment, by FY '25, the profit margin, we aim at 20% to 25% and more, 20% and higher. And last year, we witnessed the change of the market structure and customer structure. So when we had a meeting this year, in February, new Chinese customers, they're now oriented to the higher-value products, and for instance, high end. They try to come into the high-end market of the flagship. And so we try to make preparation for that. That effect will be felt after FY '22 and onwards. But inclusive of that, in -- by 2025, FY 2025, of course, there will be some change in speed. There will be the higher percentage of higher value -- higher added-value products. And answering your second one. Or should I ask Kono-san to supplement my comment?

Your question is about logic ROIC. Compared to the sensor, what is the level of ROIC? And in our business, this is the sensing business, so as a logic, as a stand-alone, we do not evaluate it independently. And so with this, I do not have any detailed answer for your question.

We'll move to the next question from Morgan Stanley MUFG Securities. Ono-san, please.

My name is Ono from Morgan. Two questions. Earlier, you talked about -- there's a question about operating profit margin. In Page 9, there's a chart, mobile profitability improvement. And when I look at this graph only in FY '19, probably won't come back, the absolute -- in terms of the absolute level of profit. But inclusive of the others and these numbers announced in FY '19, I -- and assessed earnings level that you announced in FY '19, well, when is the time frame you think you can exceed this? And by which application can you attain that goal? Second question, mobile. For mobile sensors, I think that will be the main. But competition -- differentiation against your competitors in the past -- stacking process in the past and the copper-copper technology, for several years compared to competition, you were leading them. And I think you announced that as well. But looking at the competition, what is your view or take on the competition's level? And going forward, what would be the differentiating factors? If you could comment on this, I would appreciate it.

Thank you. Two questions. In 2019, we had a good performance and the level of profit was high. But in -- well, targeting FY '25, which applications will contribute -- can we get the same level of profit and which applications would support that achievement. Those are the questions. Another thing, about the differentiating technology against competition. I think these are the 2 questions. First, in FY '19, what supported the profit was mobile business. At that time, general purpose -- well, in the past, general purpose sensors and custom sensors, we differentiated these 2. But custom sensors were being used for high-end, high-pixel, high-image quality products. But 48 mega-pixel applications pushed upward the level of the profit overall, even for the general purpose sensors. I think R&D was about 15% back then. In toward 2025, general purpose, custom products, these -- well, aside from discussing the difference of these 2, last year and this year, we had a difficult time. In the mobile area, general purpose, custom, regardless of the difference, in a similar way, we try to get back to the similar trend for both. Let's say, the profit level is high because it's customs, not so much because it's universal. It's not that. Well, the sensors, which will match the demands of the market, that's what we were going to produce. Your second question, what would differentiate us from competition? For high-image quality products and high-pixel level product, we can differentiate this, too. For high-image sensor, so far, we have experiences and good relations with the customers. And then high-image quality products have been manufactured by us in a stable manner, and we have a good relation with the customers. But going forward, for the smaller pixel sensors with the multi-pixel products in the mid-zone, then in this area, we can leverage on the strength and the signal processing and algorithm and then we can incorporate differentiation there. When customers use their camera, we would like to make a sensor to make it easier for them to take such photos. Thank you.

Now we'd like to move on to the next question, Mr. Nakane of Mizuho Securities, please.

Hello. This is Nakane. And as for the automotive area, as of FY '25, the JPY 100 million will be exceeded in terms of revenue. And in terms of profit, the 20% or higher. Is that your image? That's my question. And the second question is how far you will go -- you will do? In LiDAR, you can do. And the sensor, you do. And of course, you can produce camera. You can do data processing. And so if you like to do everything yourself, you can do. But with dealers and OEM, I think there are other relations. And for Sony, what is the most optimum business model? So how far you'd do on your own? And so this is my second question.

And the first question pertains to -- for the automotive use. FY '25, what is the size of profit as well as sales. And the second is for the automotive area, how far we will do on our own. And answering your first question, the sales -- the size of -- the sales as well as size of profit for FY '25 and for details or figures I refrain from disclosing them to you. But as I mentioned in my presentation, very smoothly, we have been developing this business. And for the automotive assets lineup, for instance, designing, and relations with the platformers and relations with OEMs, in order to build them, we spent quite a lot of research and development expenses. And we have not reached a stage where profit is generated. But over the few -- next few years, we will turn this into profit. And the second question is how far we will cover and how much we will cover on our own. And for camera, in the case of sensing area, I should say we do have a camera module, although the scale is very small. LiDAR SPAD, the announcement was already made the other day. And as for LiDAR, at this moment, as a Tier 2, the SPAD sensor will be offered to Tier 2 but as a LiDAR. In order to maximize the performance, what would be the key? And what would be key in order to penetrate this business? And internally, the signal processing is included. So we have a lot of tests conducted for that purpose. But at this moment, the sensors for camera or spot sensor, and we are still positioned, ourselves, as Tier 2.

Well, it is time, but this is going to be the last one. And if you could ask only one question, I would appreciate it. Ayada-san from JPMorgan, please.

I have one question then. Ayada of JPMorgan speaking. FY '21, against the plan of FY '21, what are the risk factors do you see? Especially more recently, on a short-term basis, this excess inventory on the part of the customers and smartphones sales slowing down in China, we hear this. But from your viewpoint, image sensor overall or Sony's overall situation, what is that? I'm sure the situation is different from one customer to another, and the high-end, low-end products may differ. But what is your take of the current situation?

Thank you for your question. FY '21, your forecast of FY '21, the risks we see considering the current market situation, I think that's the gist of your question. As you rightly said, when I have monitored the situation in China, the market inventory is gradually increasing. And this year, when we drafted our budget for this year, from the second half of last year, it seems that the structure of the customers started to differ. When we aggregate the demand of different customers, we ended up with a large number. And within ourselves, we look at the market situation and try to analyze them and then we came up with our forecast. So by looking at the market trend, we set up a plan for ourselves. For inventory at the market, China seems to be a little on the upper side or higher side. There will be -- in June, there has been an announcement in China. So I would like to wait for that. And then market seems to be upward trending. Probably by summer, the current inventory in China will disappear. Now depending on the customers, they're very good in their performance and the market can be led by these. And the China market is likely to come back. What are the other risks? When -- the previous question talked about this. It's -- there's a shortage of components, difficult to procure them now. So smaller components, not the major components, because of the lack of them, the customers cannot make smartphones and the smartphone lineup may have disruptions. And then we try to keep the dialogue open with the customers, and we have to continue our dialogue with the customers. Thank you very much.

Thank you. It is time to close the session on the Imaging & Sensing Solutions. Thank you very much. The next session on the financial services will start at 11:00. Thank you. [Break]

So now let us start the session. We would like the session on Finance. From Sony Financial Holdings, the represent -- the Director and President, CEO, Mr. Oka, will be the speaker.

Good morning. I am Masashi Oka, the CEO of Sony Financial Holdings. Today, I will discuss the new mid-range plan to be implemented starting this fiscal year for Financial Services, one of the Sony Group's 6 core businesses. I will begin with an overview of the Sony Financial Group, or SFG. Sony Financial Group is a financial group, mainly comprising life insurance, nonlife insurance and banking businesses. Since last September, Sony Financial Holdings has been a wholly owned subsidiary of the Sony Group, and it oversees the SFG as a whole. Sony Life's forte is consulting and life planning services, provided by professional life planner sales specialists. Sony Assurance and Sony Bank have established themselves as major players in both the direct and online markets. We also operate payment services, nursing care and venture investment businesses. [ NOMIO ] financial conglomerate, SFG possesses unique strength not found elsewhere. First of all, let's take our ability to stay close to people, symbolized by Sony Life's life planner sales specialists. We are proud of the unrivaled consulting skills of these financial professionals who have developed their expertise over many years. Another strength is the power of technology. This can be seen in the strong presence Sony Insurance and Sony Bank in the direct and Internet markets, and Sony Life being one of the first businesses to introduce remote consulting in the wake of the COVID-19 pandemic. A third major strength lies in the values of customer focus and originality that are shared by all our employees. Our consistently high-ranking in various customer satisfaction surveys has resulted in a highly loyal customer base. At the corporate strategy meeting the other day, Chairman, President and CEO, Yoshida, explained Sony's Mission, KANDO, and the management direction of getting closer to people as well as the key concepts of creativity, technology and the world. SFG's strength embody all of these, and we make them into our driving force. By leveraging these strengths, SFG, as a financial enterprise unique to the Sony Group, endeavors to contribute to the realization of a sustainable society. Upon becoming a wholly owned subsidiary, SFG updated our vision and values to reflect these strengths. Based on the Sony Group's purpose and values, we defined our vision and values so as to reflect our thinking as a financial business. SFG's vision is to be a financial group that helps each and every person achieve their dreams and peace of mind by staying close to people and using the power of technology to build a society in which people feel uniquely enriched. SFG also embraces 6 values, including customer focus and originality. I will now outline our mid-range plan. First is an assessment of the business environment. In recent years, SFG's top line has steadily grown, but our profit has not. The environment in which SFG operates is expected to become increasingly severe in the future due to intensifying competition, the persistence of low interest rates and diversification of customer needs. We must also respond to the rapid march of digitalization and enhanced collaboration within the group. It is necessary to objectively recognize emerging challenges to incumbent business models and formulate and promote from a group perspective strategies to thrive in this harsh environment under the leadership of Sony Financial Holdings. Our overarching objective is to thoroughly refine our aforementioned strengths and maximize the value we provide to customers. We aim to achieve top line growth that outpaces the market's growth rate while strengthening our earnings power. To do so, we must fully leverage the strengths possessed by SFG and the rest of the Sony Group. In this way, we will make a solid contribution to enhancing the corporate value of the Sony Group as a whole. Based on this mindset, the key principle of our new mid-range plan is to maximize corporate value through self-transformation. We aim to achieve sustainable, profitable growth on a group-wide basis by strengthening our group management capabilities. The strategy to bring this to fruition comprises 5 pillars, which you can see on this slide. I will now go through each of these in turn. First of all, we will thoroughly strengthen our core and unique competitive advantages. One of SFG's core competency is Sony Life's Lifeplanner channel, which constitutes a network of extensive and close customer relations. Our plans in this area aim at unlocking the full potential of this network while also undertaken measures to strengthen Sony Life agencies. We will also endeavor to raise sales productivity. Along with encouraging the sharing of the know-how accumulated by high-performance life planner sales specialists, we will capitalize on their consulting skills to significantly increase corporate sales and identify new demand for financial security. Meanwhile, in the agency channel, we will work to increase sales through agencies that serve corporate clients. We will also accelerate the transformation of the business through digital technology. Remote consulting is already taking root as a new norm. And many business processes such as insurance applications, contract changes and claims payment have already been converted to paperless. Our future plans include a rollout of new life planning tools and a greater use of digital marketing. Another focus will be providing more value to customers: the vast amount of customer data gathered from Lifeplanner consultations will be a valuable asset to enhance SFG's competitiveness. We will develop more advanced scientific approaches to fully use this data, and we will leverage the data to develop solutions that meet the true needs of our customers while expanding our product lineup to better meet those needs as they change. Through these measures, we will substantially improve the performance of our life planner sales specialists and agencies, not only in terms of volume but also in terms of quality, which is to say, productivity. First, we will increase the number of our Lifeplanner sales specialists which currently stands at more than 5,000 through careful selection, prioritizing quality. We aim to increase productivity per Lifeplanner, a measure of quality, by 20% during the mid-range plan. As I mentioned a moment ago, we will improve the value provided to customers in the areas of life planning and asset formation by introducing a new consulting tool and improving our customer data analytics. We will also be establishing a new corporate business strategy department dedicated to significantly increasing corporate sales business-wide. Regarding agencies during the mid-range plan, we aim to increase new policy amount by more than 20% by strengthening relationships with key agencies and fostering collaboration between agencies and the Lifeplanner channel. Now let's turn to Sony Insurance and Sony Bank. Both have established a solid presence in the direct and Internet channel, evidenced by how they have been consistently highly ranked for many years in various external satisfaction surveys. One strength is that their business models deliver quality service while remaining well insulated against price competition. Going forward, we build on this strength. For Sony Assurance, we will continue to build on its dominant brand share in the direct auto insurance market, while increasing the use of technologies such as data analytics. Further, we will accelerate growth by applying the automobile insurance success model to fire insurance and other categories and by enhancing cross-selling in the Lifeplanner channel. As for Sony Bank, its mortgage loan business will continue to be its core growth driver. However, it will also its expand foreign currency business. Along with proactively forging alliances with other companies, it will expand its customer base by strengthening its ties with the Lifeplanner channel. Our second strategic pillar is altering our profit structure to withstand low interest rates. Against a backdrop in which historically low interest rates are expected to continue, we will build a more resilient profit structure in the following 3 ways. First, we will improve our product mix. During the mid-range plan, we will strengthen sales of products and services that meet the needs of, not only the families that we have already always been focused on, but also corporate clients, clients who are interested in asset formation and seniors. During the mid-range plan, we will strengthen sales of products and services that meet the needs of not only the families that we have already always been focused on but also corporate clients, clients who are interested in asset formation and seniors. Meanwhile, we will raise the ratio of products with low-duration gap risk and strengthen our profit structure. Next, we will endeavor to continually improve our expense ratio. We aim to improve our mid- to long-term cost structure, including enhancing productivity and reducing the expense ratio to top line growth. And we aim to revamp operations by leveraging digitalization and improving operational efficiency. Lastly, we will upgrade our asset management capabilities. While ongoing ALM will be the basis, we plan to expand investment targets to ensure that we can generate a certain level of return even in a low interest rate environment. Being conscious of our social role as a life insurance company, we will also enhance our asset management system with an even greater emphasis on ESG. Our third strategic pillar is to further evolve customer-centric management. SFG's various companies have received consistently high customer satisfaction ratings from external market research firms for many years. Going forward, we will carry out our fiduciary duty and tighten compliance. We will also upgrade the customer experience at various touch points to ensure that customer satisfaction reaches an even higher level than before but pursuing the use of advanced technology, as I will discuss in a moment. We will adopt Net Promoter Score as a group-wide metric to assess and analyze in detail the evolution of the customer experience and improvements in customer satisfaction. By understanding the specifics of customer satisfaction at each contact point and utilizing their feedback, we will strive to craft a better customer experience while continuously improving management from a customer perspective. This brings me to the fourth component of our strategy, namely, strengthening our competitiveness through technology. Technology is one of SFG's major strengths. And it is also one of the key areas that should be further refined now that we are a wholly owned subsidiary of the Sony Group. First, we will fully leverage The Sony Group's data analytics algorithms, including AI and C-A-L-C, CALC, to realize further efficiency gains. Next, we will promote the utilization of technology with the aim of maximizing the value we provide to customers, whether through detailed remote consulting using next-generation life-planning tools or through innovations like Sony Assurance's new automobile insurance service, GOOD DRIVE, which offers cash-back to drivers with low accident risk. Lastly, in the future, we plan to use data to facilitate the development of inventive new products and services and to help us pivot our business models. Another way in which we will strengthen our competitiveness through technology is by collaborating more closely with the Sony Group's R&D divisions. Each of SFG's companies will work directly with the Sony Group to rapidly respond to the emerging digital needs. When it comes to potential issues and mid- to long-term issues, Sony Financial Holdings will take the lead in pursuing new value created by effectively integrating the Sony Group's technological expertise and SFG's knowledge of financial services. This April, we established a specialized organization called the Advanced Technology Lab within Sony Financial Holdings. This lab will closely collaborate with the Sony Group's R&D Center and Intellectual Property Center, sharing human resources as well. By sharing new business possibilities that use the latest technology among SFG companies, we aim to innovate in ways that only the Sony Group's financial business can. Our final strategic pillar is the maximization of group synergies. By situating the Lifeplanner sales specialist as the core value of SFG and as a strategic access for the whole group, we will maximize the value we provide to our customers by fostering intra-group collaboration. Specifically, we will foster cross-selling by strengthening customer transfer among group companies while integrating customer data infrastructure within SFG. By pursuing these 2 tactics together, we will create a virtuous circle, whereby strengthening the customer infrastructure of the group fosters the strengthening of our data infrastructure and vice versa. Going forward, we aim to expand the value SFG provides to the entire Sony Group with a view to developing customer transfer from group companies. The 5 points I have just outlined constitute the key strategic components of our mid-range plan. In order to execute all of these effectively, Sony Financial Holdings will take the lead in improving management quality. Specifically, along with clarifying the group-wide management plan and strategy, we at SFH will deepen our involvement with each group company and comprehensively strengthen group governance in order to ensure that respective plans are executed and goals are met. Sony Financial Holdings will make decisions regarding investments that contribute to the growth of the entire group such as digital transformation from the perspective of overall optimization. Lastly, in harmony with not only the Sony Group parent company but also customers, employees, business partners, our local communities, the environment and various other stakeholders, we will enhance ESG initiatives while working to sustainably increase corporate value. This brings me to the topic of key financial management targets for our mid-range plan, of which we have 2. First, we aim to grow IFRS operating income, excluding onetime items, at a compound annual rate of 5% or higher over the next 3 years through FY '23. Second, we aim to maintain IFRS ROE of 8% or more from FY '23, the last year of the mid-range plan. To ensure that we achieve these goals, we will divide each into specific targets and strategic KPIs associated with each business' major initiatives, and we will ensure their steady implementation and progression. Last of all, in order to pursue integrated management as SFG, promote synergy as a financial group and demonstrate our dedication to maximizing the value provided to customers, we decided to officially change the name of our holding company to Sony Financial Group Inc. I would like to express my sincere appreciation for your continuing support. This concludes my remarks today. Thank you very much for your attention.

Thank you very much. Now we'd like to take questions. So respondent is the President and CEO of Sony Financial Holdings, Masashi Oka; and Managing Director, Hiroaki Kiyomiya. So we would now like to entertain questions. [Operator Instructions] Now the first speaker from Morgan Stanley MUFG, Mr. Ono.

I'm Ono of Morgan Stanley. I have one major question, that in your slide, Page 14 -- please open Page 14 -- about technology in the future enhanced with the R&D and so forth. And so the Sony and technology, and then you get the intracompany, the support in order to contribute to your business performance. But from your side, financial side, how do you contribute to overall Sony Group? Because business exploration is one area you can contribute, but for example, that in case of Sony, that the VISION-S is a project that they have just rolled out. And then the actual business implementation might be a bit later, but anyway, autonomic -- autonomous driving, ADAS is a new segment. And then there are other nonlife insurance companies considering the risks of ADAS and then the score system and trying to business -- a specific business related to ADAS. But on behalf of your company, what do you -- how do you perceive this business opportunity? It's not just limited to VISION-S, but as of the status quo in U.S. Sony, how -- if you like to provide the know-how of your financial group to Sony, how can you contribute? And do you have any thoughts and idea as to the VISION-S?

Thank you, Mr. Ono, for your question. The technology is the area where you can collaborate. And then in that sense, the Sony technology could be applied and utilized. And that's the very clear message.

But from SFG to Sony Group, how do you intend to make contribution to overall Sony Group and your idea on that?

Well, SFG has a strength, unique strength. So in that sense, I already covered in my talk especially, it's a close-to-people type of attitude. That's our strength. For each person, customer throughout their life, then we give them the sense of honesty and comfort and then help them to realize their dream. So in that sense, first, within the SFG and member companies, not just Sony Life but other member companies in the SFG, that we'd like to offer the maximum value to the customers. So -- and data, the platform should be harmonized. And then cross-selling should be promoted. And then the merchandise capability attractiveness is being enhanced. And the marketing capabilities is being enhanced so that AI and other technology will be applied to enable that. But first of all, within the SFG intracompany, we'd like to implement these ideas. But in the future, we'd like to contribute to overall Sony Group. For the customers of overall Sony Group, we'd like to deploy this so that the other businesses -- there are numerous various businesses in Sony Group, so we'd like to send the customer to that. So customer, the transfer is very important. Our strength should be really utilized and contributes to the overall Sony Group for the betterment of the service to the overall customers of Sony Group. So our contribution to Sony Group, in that sense, that we have to really achieve the sustainable growth. And then through that sustainable growth, yes, we will contribute to Sony Group to enhance the corporate value.

We'll proceed to the next question from SMBC Nikko Securities, Muraki-san, please.

My name is Muraki of SMBC Nikko Securities. Two questions, if I may. First, about the financial numbers and targets, this time around, the growth -- the assumption of the growth of the operating incomes, when I look at it, JPY 190 billion of profits and JPY 25 billion of profit. Well, it's -- what are the drivers for this? Number of the increase of the policies or the more -- higher efficiency of your work or probably you take more risks on the asset management? I think you assume the change of accounting standards. And what are the impacts of these changes to your assumption of the operating income increase of 5%? Second question, your core is the Lifeplanner sales specialists of the Sony Life. It seems that the headcount increase slowed down for a while. But during the current MRP, how are you going to do about the headcounts? Are you going to increase the number -- total number of personnel considering quality as well?

Thank you for your 2 questions. The first question is about the driving force of the increase in the profit going forward. And second is the Lifeplanner -- number of the Lifeplanner sales specialists. It seems that the headcount growth are slowed down, but in the next 3 years, are we going to increase the headcount or not. About the first question, on the IFRS basis, the operating income, that's 5% or more, that's the target of the growth. The top line has been increasing steadily. However, the profit itself just showed the sideway movement. So we need to be mindful of the bottom line for growing profit. As a launching pad, last year's U.S. -- on a U.S. GAAP basis, the profit on U.S. GAAP profit and there are onetime items included. For example, the COVID-19 impact and then the life planners, there is a support or subsidy to the life planners in terms of remuneration. And under COVID, so for the auto insurance, there was this decrease in the loss ratio. And those are the onetime item pushing up the level of profit. In bank, compared to March last year, the market witnessed disruptions. In FY '19, there was some evaluation loss. And based on this, there was this rebound from that in terms of more profit. And there was this impairment of the nursing care services. So if we exclude the onetime items like this, on a U.S. GAAP basis, last year's profit was about -- somewhere between JPY 153 billion to JPY 155 billion. That's the launching pad. IFRS profit and the U.S. GAAP's profit, there seems to be -- there is a difference between these 2. On an IFRS basis, we are still calculating the profit. But excluding the onetime items, well, I think the final -- the answer will be close to the U.S. GAAP basis excluding the onetime items. And that will be the launching pad. There are factors. The top line, we have to grow the top line. In the past, the Lifeplanner sales specialists demonstrated their ability to stay close to people. And with other businesses in terms of auto insurance and mortgage loans, they were doing fine. So we try to continue to grow the top line above the market. And the expense ratio, rather than containing the absolute amount of the expenses, we look at the proportion -- its proportion against the top line. And we try to contain the growth rate of the expenses against the sales, and that's the first starting point for us and important for us. In terms of Life, Sony Life, against the premium of -- for a year, the SG&A is about 7%. Compared to other companies, it seems that we have low numbers, but we have some room to improve. Manageable expenses will be 6.5%, in my view. And we would like to bring it down to 5% as soon as possible; on a mid- to long-term basis, in the mid-5% level. That's where we are going to target at. That's the expense ratio. And the third point that you mentioned are the product mix. One more thing, product mix. In my presentation, I mentioned this, we tried to strengthen our corporate client services to increase the profitability. And finally, as Muraki-san said, that the asset management, we have been very conservative in our asset management in itself, it is good. But probably, we can be more active on this to take more credit risks. For example, investment in the government bonds and corporate bonds so that we can increase the profit, that's a possibility. And that can be a driver for the growth of the profit. In terms of the top Life growth, the most important thing is the improvement of productivity of the Lifeplanner sales specialist, as I said in my presentation, 20% improvement of the productivity is what we aim at. And Lifeplanner sales specialists, what is most important for them is the improvement of the quality, improvement of the productivity. That's the most important. But together with that, we select talents under strict terms. And with the quality in mind, we try to increase the number of headcount. In the past, under the COVID-19, the number of Lifeplanner increased 5,200, a little less than 5,200. At this moment, FY '23, we would like to bring it to [ 2,500 ] by FY '23. I repeat again, the quality -- improvement of the quality of the life planners is so important.

We are taking the next question, [ Sato-san ] from Mizuho Securities, please.

I'm [ Sato ] of Mizuho. So I have 2 questions. The first point is that the life planners, you are not to drastically increase the number, but still productivity as well as the number of the contract amount should be increased by 20%. So you'd like to achieve that in 3 years. So that the new contract signed should be increased as well. New policies should be increased. But in that sense, depending upon the products then, what is the product mix? Do you have any particular idea on the desirable product mix? Maybe the production should be increased as a basic policy. But maybe last year, the foreign currency based one might have some impact on the eventual return. So in that sense, in terms of the flow, what is overall, the portfolio mix and idea on portfolio mix? So some of the listed life insurance companies had all announced their -- mostly their midterm business plan. So the capital cost is taking into account like ERM will be promoted and so on. Maybe that's a concept. And your company is not listed but as -- because in Sony Group, you like to make contribution to the value enhancement at Sony Group. So what is the concept? And the concept is similar probably necessary. So capital cost will be recognized. And then maybe the capital allocation policy or the remittance policy of the parent company, could you please tell us more quantitatively about all that ideas?

Thank you, [ Mr. Sato ]. So 2 major parts of the questions. Your first question is related to the new policy that is to be increased. But still, what is the product mix and the portfolio mix? What kind of product will be the focus? And how the product mix is likely to change? The second question is that as to the capital cost, our philosophy on that as well as the capital allocation ideas. So that's, I think, the gist of those questions. As to the first question, so far, Sony Life has a strength that is life, the mortality, the guarantee type. So this lifelong policy, I think, will be our strength. And we'd like to strengthen that continuously so that it has a long term. So during this long lifespan, the interest rate fluctuation will be the major risk. And then the capital might not be fully utilized effectively during this long lifespan of the policy. So that the interest rate is sold too low in recent years. Taking that into account, the environment is fluctuating and changing meantime. So ERM -- as with the ERM, as [ Sato-san ] explained, the interest rate risks must be taken into account. We have to be concerned about that especially when we design the desirable product mix so that the interest rate risk needs to be lowered. So there is a certain interest rate risk. And in the long term, maybe bond and investment -- in the long-term bond might be enhanced to reduce the current interest rate risk. But in the new product, there could be the type of the interest risk entailed, and that should be also reduced. So including corporate customers, maybe fixed-term-type policies should be sold or variable, the type of this -- the annuity that products need to restrengthen in terms of our sales and marketing. And because of all those new products and so on, the weight and the percentage of the products which entail less interest rate risk should be increased. So that will lead to the improvement of the profitability as well. The second one is our capital cost and philosophy of that. SFH is no longer the listed company, so major mirroring is kind of difficult. The firm we were listed, when we look at the beta or the data in -- compared to the other insurance companies, the beta was low, very low. So that's one characteristics. So in terms of our estimates, the capital cost is about 6%. So in that sense, 8% is our ROE target we set or more than 8% or minimum of 8% of ROE and taking all those factors into account to set that goal. But anyway, 6% or so is this -- may be the capital cost. And naturally, we need to increase this profit, and then ROE will be increased. But capital cost needs to be curtailed, controlled, which is very important. So in that sense, as we explained, the product mix could be improved. And because of the better product mix, the interest rate risk will be lowered. And that is to say that the capital cost will be also lowered. So those are all linked together. Our capital policy, we have to really say that the financial business, the most important thing is this healthy, sound refinance. So in proportion to the risk, we have to maintain the other good capital-based equity so that as the financial business manager, we -- that is the grand premise. And a sustainable profit increase is necessary for the mid- to long term. In other words, the corporate value needs to be enhanced in the mid- to long term. So in that sense, toward a better profitability for the future, we have to make the DX and other things, but we have to make a strategic investment. So that the capital needs to be secured at the adequate level. As a policy, in terms of core business, that needs to be grown sustainably. That's where our focus and emphasis is. So there's a necessary investment for that growth and so that the investment is done for the growth. And then we have to expand the profit over the mid- to long term. Stably, there may be -- dividend payout is our aim. So through that overall Sony Group, the corporate value should be enhanced, and that's where our company's contribution will be.

It is time to close the session on the financial services. Thank you very much. Thank you. With this, we would like to end all the sessions of Sony IR Day 2021 for 2 days. I would like to thank you very much for your participation. Thank you.