Sony’s Q2 profit drops 29% amid chip slump

Sony's operating profit fell 29 per cent in the July-September quarter as the company was hit by a weaker performance at its image sensor and financial divisions.

Profit for the quarter was 263 billion yen ($1.74 billion). That compared with a 306 billion yen estimate from 10 analysts polled by LSEG.

The Japanese tech conglomerate has shifted from being the creator of iconic household electronics such as the Walkman to an entertainment behemoth straddling games, movies and music and is also a leading maker of image sensors.

Profit at Sony's chips division slumped by 37 per cent, hit by higher expenses and weaker sales of image sensors, which are used in smartphones.

"The North American market shows a significant year-on-year decline and at this point there's no change to our view that a recovery in the market will take place from next fiscal year," Sony President Hiroki Totoki told a news briefing.

Sony maintained its sales target of 25 million PlayStation 5 (PS5) consoles this financial year with the company looking for a boost from a new, slimmer version of the device.

"It's not something we can attain very easily," Totoki said of the PS5 target.

The conglomerate sold 4.9 million PS5 units in the second quarter, bringing sales this financial year to 8.2 million units. A handheld device that connects to the PS5 over WiFi launches next week.

Industry observers were surprised by the recent announcement that gaming chief Jim Ryan will step down next March with developer Bungie cutting staff amid widespread industry layoffs.

The October 20 release of "Marvel's Spider-Man 2" offers cheer going into the key year-end shopping season, with five million units of the game sold at the end of that month, Sony said.

Rival Nintendo has scored a string of hits in recent months as the company continues to draw in gamers despite eschewing the cutting edge graphics Sony and Xbox maker Microsoft have pursued.

Sony hiked its full-year sales forecast for the games unit by almost 5 per cent to 190 billion yen and maintained its profit forecast.

In the second quarter profit was supported by higher sales of third-party games but impacted by an increase in hardware losses.

Sony's movie division will co-finance and distribute a live action adaption of Nintendo's iconic "Zelda" franchise, leading to analysts raising the possibility of further collaboration between two leading Japanese entertainment companies.

"Sony's strong distribution network and publishing track record could make it a strategic move for Nintendo," Jefferies analyst Atul Goyal wrote in a client note ahead of Sony's earnings.

The company maintained its full-year operating profit view at 1.17 trillion yen but raised its sales and net income forecast by 2 per cent each.

Sony shares ended down 0.8 per cent on Thursday ahead of the earnings report. They have climbed 32 per cent so far this year.