Sony disagrees with splitting its semiconductor business, long-term retention is the best strategy

According to foreign media reports, Sony said on Tuesday that the company's board of directors and management disagreed with the proposal of its shareholder activist hedge fund Third Point to separate its semiconductor business from its entertainment business and list it separately.

Reuters reported that Sony's board of directors and management agreed that retaining the semiconductor division is the best strategy for Sony in the long run and will enhance Sony's value. In addition, by retaining the semiconductor division, Sony can also combine photosensitive components with AI to develop self-driving cars, games and other related chip products, thereby enhancing the competitiveness of the semiconductor division.

SONY is a leader in photosensitive components for mobile phones and cameras, providing them to global mobile phone manufacturers including Apple Inc. and Huawei. According to data from iHSMarket cited by Nikkei Chinese, the global CMOS image sensor market is worth $12 billion, up 5.1% year-on-year, of which Sony's market share reached 50.1%. Although its share fell by 1.8%, it still exclusively controls half of the global market share.

Sony also decided to continue to hold shares in its financial subsidiary. On the one hand, Sony partially accepted the request to sell Olympus shares, but made it clear to Third Point, which holds Sony's shares, that it would not make concessions on its core business.

Sony released a letter to shareholders signed by its president and CEO Kenichiro Yoshida on the 17th. Sony has been discussing with external experts since Third Point proposed to split and list its semiconductor business in an open letter in June.　

Sony's letter showed that the board of directors "reached a unanimous conclusion that continuing to maintain the semiconductor business will help improve long-term corporate value." Yoshida Kenichiro said Sony hopes to pay more attention to creating value in the long term.

Sony is said to be planning to combine image sensors, which have the largest market share in the world, with artificial intelligence (AI) to develop automotive business, etc. Semiconductors are positioned as "a symbol of Sony's technology." The company said, "Semiconductors are the most important technology from the perspective of increasing long-term corporate value."

It is reported that after Third Point acquired Sony's shares, it proposed in June this year to split the listed semiconductor business into an entertainment company and a semiconductor company, and sell shares of its financial subsidiary and Olympus shares.

It is reported that this is the second time Daniel Loeb has attacked Sony in six years. Daniel Loeb's reason is that the complex structure makes Sony's stock undervalued. Sony said that it will hold the stock of its financial subsidiary at this stage, hoping to help increase Sony's corporate value.

However, Sony announced at the end of August that it would sell all of its shares in Olympus, which is equivalent to about 5% of the issued shares, for about 80 billion yen. The capital relationship between the two parties will be terminated, but they will continue to cooperate in the medical business developed through the joint venture.

Sony and Olympus established a joint venture in 2013 to develop and sell endoscopes and surgical microscopes that use Sony's 4K ultra-high-definition image technology to clearly display the patient's affected area. Sony believes that the cooperation has achieved results and will continue to cooperate at the business level in the future.

With Sony's refusal to split its semiconductor business, the ball in the negotiation is back in Third Point's court, and the company's next move is attracting attention.