Sony MPK-THC User Manual

Throughout history, curiosity has been a source of inspiration,
expanding the possibilities for the future.
The fun of discovery; the joy of creation; technology that goes beyond “convenience” to touch the hearts –
these concepts have driven Sony since its founding.

Quest for Curiosity: QRIO.

QRIO embodies Sony’s dreams and most advanced technologies in recognition,
motion control, communications, IT and AI.

Through QRIO’s continued growth and development,
Sony will pursue the infinite possibilities of curiosity.
The resulting technologies will be applied to a wide range of products and services,
beyond robots, to enhance the joy of life.

Let’s discover the future together!

1

To Our Shareholders

Sony continued to face a challenging business environment during the fiscal year ended March 31, 2004. Nevertheless,
our sales increased as a result of higher sales to outside customers in the Electronics segment and higher revenue in the
Financial Services segment. Measures taken to bolster our lineup of electronics products proved to be particularly
beneficial. Our aggressive launch of new products in such categories as digital still cameras, flat panel televisions and
DVD recorders led to significant sales growth during the 2003 year-end holiday season. Operating income, in contrast,
fell sharply, primarily due to an increase in restructuring expenses and research and development expenses in new
businesses that will foster growth in the years ahead.

In the fiscal year ending March 31, 2005, we will concentrate management resources in businesses with significant
growth potential, making substantial investments in such areas as next generation, multi-purpose processors and other
key components and increasing the number of internally produced key components. By producing these components
internally, we will be able to build in added value — thereby differentiating them from the rest of the market. We are
planning to introduce more products that will be recognized as distinctly “Sony” in both the home and mobile electronics
categories, as well as innovative services, including an online music distribution service. At the same time, we will
continue to strengthen our operations through restructuring initiatives and take steps to improve the efficiency of our
product development and design. Through these and other initiatives, the Sony Group will lay a firm foundation for
growth and higher profitability in the mid- to long-term.

April 27, 2004

Nobuyuki Idei Kunitake Ando
Chairman and Group Chief President and Group Chief

Executive Officer Operating Officer

2

Management Message

02 To Our Shareholders

“Continuing to be One of the World’s Leading Consumer Brands”

04

Nobuyuki Idei

07

“Operational Restructuring Aimed at Realizing Outstanding
Efficiency and High Added Value”

Kunitake Ando

Strategy

18 The Future of Key Components
24 Research and Development
28 Sony Craftsmanship

Convergence

40

– A Key to Sony’s Constant Transformation

• Home Electronics

• Mobile Electronics

• Game

• Entertainment

• Financial Services

• Other

Products

11 Sony Products File 01-06

• File 01 – Flat Panel Television “WEGA”

• File 02 – DVD Recorder “Sugoroku”

• File 03 – DVD Recorder “PSX”

• File 04 – PC “VAIO”

• File 05 – Digital Still Camera “Cybershot”

• File 06 – Video Camera “DVD Handycam”

Topics

36 At a Glance: Operating Performance Highlights
55 Sony’s Advertising Around the World
56 Corporate Governance
58 New Members of the Board and Corporate

Executive Officers

107 Investor Information

Report

30 The Inside Story from Sony’s

Nagasaki Fab

People

Sony with You

10 Claude Nobs
23 Eikou Sumura
34 Alejandro M. Lopez
35 Lance Lee

Financial Section

59 Consolidated Financial Information
105 Stock Information
106 Stock Acquisition Rights and Bond Information

Cautionary Statement

Statements made in this annual report with respect to Sony’s current plans, estimates, strategies and beliefs and other statements that are not historical facts are forward-looking statements about the future
performance of Sony. Forward-looking statements include, but are not limited to, those statements using words such as “believe”, “expect”, “plans”, “strategy”, “prospects”, “forecast”, “estimate”,
“project”, “anticipate”, “aim”, “may” or “might” and words of similar meaning in connection with a discussion of future operations, financial performance, events or conditions. From time to time, oral or
written forward-looking statements may also be included in other materials released to the public. These statements are based on management’s assumptions and beliefs in light of the information currently
available to it. Sony cautions you that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, and therefore you
should not place undue reliance on them. You also should not rely on any obligation of Sony to update or revise any forward-looking statements, whether as a result of new information, future events or
otherwise. Sony disclaims any such obligation. Risks and uncertainties that might affect Sony include, but are not limited to (i) the global economic environment in which Sony operates, as well as the
economic conditions in Sony’s markets, particularly levels of consumer spending; (ii) exchange rates, particularly between the yen and the U.S. dollar, the euro and other currencies in which Sony makes
significant sales or in which Sony’s assets and liabilities are denominated; (iii) Sony’s ability to continue to design and develop and win acceptance of its products and services, which are offered in highly
competitive markets characterized by continual new product introductions, rapid development in technology and subjective and changing consumer preferences (particularly in the Electronics, Game, Music
and Pictures segments); (iv) Sony’s ability to implement successfully personnel reduction and other business reorganization activities in its Electronics, Music and Pictures segments; (v) Sony’s ability to imple­ment successfully its network strategy for its Electronics, Music, Pictures and Other segments and to develop and implement successful sales and distribution strategies in its Music and Pictures segments in
light of the Internet and other technological developments; (vi) Sony’s continued ability to devote sufficient resources to research and development and, with respect to capital expenditures, to correctly
prioritize investments (particularly in the Electronics segment); (vii) the success of Sony’s joint ventures and alliances; and (viii) the risk of being able to obtain regulatory approval and successfully form a
jointly owned recorded music company with BMG. Risks and uncertainties also include the impact of any future events with material unforeseen impacts.

33

Continuing to be one
of the world’s leading
consumer brands

– Nobuyuki Idei, Chairman

By successfully executing “Transformation
60,” Sony is enacting bold reforms that will
create new value and generate growth

What is your assessment of the current
operating environment, and what are
Sony’s primary goals in this environment?

The markets Sony is involved in are undergo­ing dramatic changes. In the consumer elec­tronics industry, we are witnessing rapid
advances in cutting-edge technologies in such
areas as networks and semiconductors. The
industry has been further thrust into an age
of mega-competition by the entry of new
participants from other industries and strong
economic growth in countries such as China,
India and Russia. The needs of customers are
becoming more diverse than ever, and ad­vances in network technologies are creating
new ways to enjoy music, movies and other
content. The pace of change will only con­tinue to accelerate.

Sony has been a fountain of groundbreaking
ideas since its inception in 1946. The transistor
radio, the Trinitron color television and
Walkman are just a few of our many innova­tions that have altered people’s lifestyles. Sony’s
hallmark has always been its ability to identify
trends sparked by changes in the times and in
customer needs, and to use that insight to
create innovative products and services. Some
people believe that today’s remarkable pace
of change makes this a time of chaos. At
Sony, however, we believe this is a time of
unlimited possibilities and opportunities.

In this environment, it is vital that we initiate
reforms in order to remain a youthful, energetic

company for the 21st century. This is why we
formulated a group-wide mid-term corporate
strategy called “Transformation 60” (TR60),
scheduled for completion in 2006, Sony’s 60th
anniversary. Our objective is to position Sony as
a truly global company with an operating frame­work capable of withstanding dramatic shifts in
business conditions. This will allow us to remain
one of the world’s leading consumer brands.

Sony’s aim is to continue to be a leading
consumer brand and evolve as a 21st­century global company
To this end, Sony is implementing dramatic
structural reforms and a growth strategy
based on the convergence of management
resources

Can you explain TR60 in more detail?

TR60 can be thought of as having two central
pillars. One is a structural reform to enhance
our operational profitability. The other is a
growth strategy.

The first pillar is designed to enhance the
profit structure of our businesses. We are
doing this by cutting fixed costs through the
downsizing of our workforce and the consoli­dation of our manufacturing, distribution and
customer service facilities. We are also endeav­oring to reduce variable costs by reassessing
our strategy for the procurement of produc­tion materials.

The second pillar, our growth strategy, posi­tions home electronics, mobile electronics and
entertainment content as core businesses and
focuses on the convergence and centralization of
management resources within the Sony Group.

In the home electronics category, we believe
that the role of the television as the center­piece of the living room will be enhanced by its
increasing ability to be linked up with other
electronics devices and access a wide range of
content. In the mobile electronics category, we
plan to accelerate the convergence of mobile
handset communication functions and audio­visual functions, such as those found in video
cameras and digital still cameras, in a manner
similar to that in which functions have already
been added to cellular phones.

Concurrently, Sony is making substantial
investments in key components such as semi­conductors that we believe are strategically
important. By increasing the proportion of
key components produced internally, we plan
to increase the proportion of added value
captured by our finished products. We believe
that this will further enhance the differentia­tion of our products from those of our com­petitors. An additional goal is to maximize
operating efficiency by leveraging information
systems to strengthen both our demand and
supply chain management operations.

Our convergence strategy for the entertain­ment business is equally important. We plan to
capitalize on our entertainment assets in
music, pictures and games to increase the
value of our content. At the same time, we will
accelerate the convergence of entertainment
content and electronics products, building a
new business model that is suited to the net­work era. Through these activities, we intend
to generate further growth in our entertain­ment business, positioning us even more firmly
as a global media and content company.

44

“Transformation 60” is a road map for
transforming Sony into a global
company of the 21st century for the
year 2006, Sony’s 60th anniversary

Transformation 60

“Transformation 60” — a group-wide mid-term
corporate strategy
“Transformation 60” has set in motion sweeping reforms
for the entire Sony Group. The objective is to ensure that
Sony remains as one of the world’s leading consumer
brands in the 21st century by developing attractive
products, content and services.

• Initiate reforms to improve Sony’s profitability

• Execute growth strategies by clearly defining Sony’s business
categories and focusing the allocation of strategic technological
and management resources

5

While continuing to be a company that evokes
fascination and excitement, the management
team is working together to build a foundation
for future growth

How did Sony perform in the fiscal year
ended March 31, 2004 vis-à-vis its mid-term
corporate strategy TR60?

Sales for the fiscal year ended March 31,
2004 increased 0.3% to ¥7,496.4 billion. Due
to restructuring expenses, operating income
fell 46.7% to ¥98.9 billion.

In the Electronics segment, we focused on
strengthening our product lineup. Sales of flat
panel televisions increased significantly. We
expanded our LCD and plasma television
product lineups, and Grand Wega, our rear­projection television achieved substantially
higher sales, especially in the U.S. We intro­duced several new DVD recorder models,
which led to an increase in our market share
from late 2003 to the spring of 2004. In the
intensively price competitive digital still camera
market, the success of our best selling
product, contributed to profitability. We also
retained our leading market share in the video
camera market, which remains the most
profitable category in the Electronics seg­ment. In the PC market, another area of fierce
competition, we significantly increased profit­ability in our VAIO business by focusing on
value-added models.

In the Game segment, total cumulative
production shipments of the PlayStation 2
(PS2) consoles surpassed 70 million units.
Software remained strong, too, as the annual
number of units shipped increased, proving
that the PS2 business is still in its peak years. In
the Music segment, past restructuring initia­tives have resulted in significant improvements
in profitability, allowing us to record an oper­ating profit, compared with an operating loss

in the previous year, despite the continued
contraction of the global music industry. The
Pictures segment achieved record-breaking
revenues on a U.S. dollar basis due to higher
sales within the television business. In the
Financial Services segment, higher insurance
revenues, along with an improvement in
valuation gains and losses from investments,
contributed to an increase in both revenue
and profit. In April 2004, we established Sony
Financial Holdings Inc. (SFH). This financial
holding company will play a pivotal role in our
drive to create synergies among our life insur­ance, non-life insurance and banking busi­nesses, and to increase the total value of our
financial services business.

What are Sony’s primary objectives for the
fiscal year ending March 31, 2005?

I view the current fiscal year as a time for Sony
to firmly execute the fundamental strategies
that were formulated in the previous fiscal year.
In the Electronics and Game segments, we
will accelerate our convergence strategy and
one of the goals is to introduce highly attrac­tive products in both the home and mobile
electronics categories. In the home electronics
category, we intend to accomplish this by
aggressively pursuing superior display picture
quality and increasing the speed and capacity
of storage devices. We will introduce a rear­projection television with a high resolution
display device and a home server with more
than a terabyte of storage capacity. In the
mobile electronics category, through close
cooperation with Sony Ericsson Mobile
Communications AB, we will promote the

convergence of our electronics products and
wireless technologies in products such as
cellular phones and wireless LANs. New
mobile products in the pipeline include
PlayStation Portable (PSP), a handheld video
game system, and a cellular phone equipped
with FeliCa, a contactless IC card technology.
We will also continue to invest strategically in
key components such as semiconductors.
Examples of ongoing development projects
include the Cell, a next generation multi
purpose microprocessor; imaging devices like
CCDs and CMOS image sensors; display
devices; and storage devices.

As for our entertainment business, our
entertainment and electronics businesses
joined forces in May 2004 to launch a music
download service called Connect in the U.S.,
and to introduce new Sony products compat­ible with this service. We will see more con­vergence between our entertainment and
electronics businesses. At the same time, we
will continue to strengthen our capabilities in
content development and develop new busi­ness models for the coming network era.

I firmly believe that Sony will remain a
leading consumer brand in the 21st century.
Sony will continue to be a company that
evokes fascination and excitement among its
shareholders and investors, as well as among
its customers, employees and other stake­holders. The management team is dedicated
to building a new foundation that will sup­port expansive growth in the years ahead.

66

Operational restructur­ing aimed at realizing
outstanding efficiency
and high added value

Phase 2 structural reforms are a vital element of “Transformation 60.” Here,
President Kunitake Ando discusses these reforms and his vision of Sony’s future

Structural reforms are an important element of
“Transformation 60” (TR60), Sony’s mid-term
corporate strategy. Would you tell us more
about these reforms?

In 1999, Sony embarked on the first phase of
structural reforms, which included consolidating
operating bases and reducing its workforce. These
reforms produced some benefits. However, the
pace of change in Sony’s operating environment is
accelerating, as evidenced by rapid technological
progress, particularly with respect to semiconduc­tors, and industrial realignment. To assure Sony’s
continued growth as one of the leading consumer
brands, TR60 sets forth a second phase of struc­tural reforms, focusing primarily on our electron­ics business. These reforms are designed to create
an efficient, value-added operating framework
befitting a leading global company. In concrete

terms, we intend to strengthen our operating
structure through cuts in fixed costs and production
material and other variable costs, and the genera­tion of more added value within the Sony Group,
thereby creating a foundation for implementing a
growth strategy.

For this purpose, we are implementing structural
reforms centered on five themes: (1) intensifying
our focus on strategic businesses; (2) accelerating
reform in global manufacturing activities;
(3) streamlining administrative, sales and market­ing operations; (4) transforming design processes,
quality management and the procurement of
production materials; and (5) restructuring the
procurement strategy for non-production materi­als. In the fiscal year ended March 31, 2004, the
Sony Group, through the implementation of
initiatives to reduce fixed costs, recorded restruc­turing expenses of ¥168.1 billion.

Breakdown of Restructuring Expenses Recorded in the Fiscal
Year Ended March 31, 2004

(%)

Electronics
Music
Pictures
None of the above

2.7

5.7

6.4

Total:

¥168.1 billion

85.2

Early retirement
Asset sales and disposals

20.6

Total:

¥168.1 billion

79.4

77

7

Accelerating the identification of, and focus on,
strategic businesses and shifting management
resources from mature to strategic product
categories

Please outline Sony’s plans to tighten its focus on
strategic businesses, one of the themes of the
structural reform program.

Naturally, improving earnings in the Electronics
segment, which accounts for more than 60% of
Group sales, is a central element of our profit–
structure reform measures. In our consumer elec­tronics business, product life cycles have become
much shorter due to the increasing speed of tech­nological progress. To focus on strategic busi­nesses, we are dividing our electronics business
into two product categories, strategic and mature.
We are concentrating our product design and
development resources in strategic product catego­ries where future growth is expected, such as flat
panel televisions, home servers and mobile devices.
We expect this will lead to higher efficiency and
business expansion.

To add more value to products in strategic
categories, it is essential to strengthen our lineup
of semiconductors and other key components, as
well as to produce a larger share of these compo­nents internally. With this in mind, we established
a new unit to centralize the management of the
Sony Group’s semiconductor business. The aim is
to make our semiconductor business more com­petitive through unified strategies. In the fiscal
year ended March 31, 2004, we designated flat
panel televisions, DVD recorders, digital still
cameras, video cameras and VAIO PCs as strategic
products. We strengthened and expanded our
product lineups in these categories and introduced
new models in a timely manner. This focus pro­duced enormous benefits during the 2003 year­end holiday season.

In contrast to sales in strategic product catego­ries, sales in mature product categories are ex­pected to fall as a share of total sales. However, we
intend to raise efficiency and maximize earnings in
mature product categories by upgrading the design
and production capabilities of our manufacturing
units, as well as by outsourcing work.

Accelerating reform in manufacturing activities

What steps are you taking to accelerate the
reforms of global manufacturing activities?

The goal of our manufacturing reforms is to
achieve a qualitative shift from assembly-oriented
manufacturing to knowledge-intensive methods.
To accomplish this goal, we are reinforcing the
role of global manufacturing bases in adding value
to products. At the same time, we are reviewing
our existing manufacturing systems and overhaul­ing design and production systems to better reflect
the characteristics of each regional market.

At each of our manufacturing facilities, we are
enhancing the technical skills involved in design and
production activities, both of which are essential to
making competitive products. Concurrently, we are
integrating the existing design, production, cus­tomer service and logistics functions of factories to
establish a more sophisticated supply chain manage­ment system. This will enable us to strengthen our
Customer Front Center (CFC) activities, which
connect us directly to retailers and end users. Based
on this concept, we are restructuring design, manu­facturing, logistics and customer service functions
on a global scale. We will also implement factory
realignments and consolidations as part of this
restructuring process. Ultimately, we expect to see
higher efficiency in all manufacturing activities.

Streamlining administrative, sales and market­ing operations

What kind of structural reforms are planned for
administrative, sales and marketing operations?

We are streamlining administrative, sales and
marketing operations mainly in Japan, the U.S.
and Europe. One way we are accomplishing this is
by building common platforms that can perform
administrative functions for many business units
and sites. Another is by raising white collar pro­ductivity through reviews of administrative busi­ness processes and the greater use of IT systems.

In the U.S. and Europe, we are consolidating
our operational bases in each region. In our U.S.
electronics business, for example, we are relocating
our marketing groups so that they may be closer to
our engineering, manufacturing and other head­quarter functions. This move will naturally foster
greater levels of cooperation and communication,
thus strengthening our design, manufacturing, sales
and marketing operations as well as increasing the

efficiency of our administrative functions.

Along with these measures, we are revising
personnel systems in Japan. In line with the prin­ciple of matching compensation with contribu­tion, we will rigorously implement a merit-based
compensation structure. Our plans also include
enhanced diversity in our workforce and our
employment structure. Through these and other
efforts, we are building new kinds of relationships
between Sony and its employees.

Greater cost reduction through group-wide
initiatives

How is Sony transforming design processes,
quality management and the procurement of
production materials?

We are now pushing through far-reaching reforms
in design processes, quality management and the
procurement of production materials—domains
that support the fabrication of products. In the
area of product design, we are raising efficiency
through the extensive use of standardized design
technologies and components, and becoming
more competitive by sharply reducing the time
required to formulate new designs. For production
materials, we are strategically cutting costs through
the standardization of components and the con­centration of procurement with specific suppliers.

Quality is the highest priority of any manufac­turer. During the fiscal year ended March 31,
2004, we initiated an exhaustive and group-wide
review of quality-related systems. We will execute
initiatives to enhance quality so that we can deliver
high-quality products to all customers.

Transforming Sony into a leading global
company through TR60 reforms

Please describe what Sony is seeking by carrying
out this second phase of structural reforms.

At Sony the most important theme is building a
powerful operating framework that can constantly
deliver products and services worthy of the Sony
name, even when our markets are undergoing
dramatic changes.

Reforms are inevitably accompanied by challenges.
The Sony Group is fortunate to have employees
who have the motivation to embrace these chal­lenges. Our reforms and growth strategy, progress­ing side by side, will ensure that Sony continues to
grow as a leading company on the global stage.

(as of May 2004)

8

Phase 2 Structural Reforms

(1) Intensifying our focus on strategic businesses
(2) Accelerating reform in global manufacturing activities
(3) Streamlining administrative, sales and marketing operations
(4) Transforming design processes, quality management and

the procurement of production materials

(5) Restructuring the procurement strategy for non-

production materials

Building a powerful operating framework
through structural reforms

9

Producer of the
Montreux Jazz Festival,
held annually on the
shore of Lake Geneva
in Switzerland, Mr.
Claude Nobs is a big
fan of Sony products.

Sony is dedicated to creating dreams and experiences that make our
lives more enjoyable and enriching. In this section, we introduce four
Sony enthusiasts who work closely with Sony products every day.

A stellar performer at the Montreux Jazz Festival

Surrounded by Sony at home and in
the studio

Sony products, especially my P900 Sony Ericsson cellular phone, are an
essential part of my life at home and at the Montreux Sounds Video
Studio. At the studio, I use an XPRI HD (high-definition) non-linear
video production system for editing and transferring material. I also
have a D-2, Digital Betacam, Betacam SP (Super Performance) and IMX,
which I use to make copies of video clips in various formats. At home,
my favorite Sony products are my PX40 projector and 50-inch plasma
television. They’re perfect for showing my jazz festival HD video
recordings to important guests and artists. So hardly a day goes by
without Sony.

The late Ray Charles performing at the 1991 Montreux
Jazz Festival

A fascination with innovation

When Sony comes out with a new product, I buy it immediately. I recall buying the first Sony Walkman and
CD player as soon as they went on sale in Europe. I also bought the first SACD (Super Audio CD) player
model and the very first VAIO PC, even though the instruction manual was only available in Japanese. And
I’ve even owned three generations of AIBO entertainment robots.

Claude Nobs CEO, Montreux Jazz Festival

Born in Switzerland in 1936, Claude Nobs gave up a career as a chef to found the Montreux Jazz Festival in 1967. Now a 17-day event held
every July and attended by 200,000 people annually, the festival has grown to feature a wide range of music, from jazz to blues and rock.

Montreux Jazz Festival URL: http://www.montreuxjazz.com

10

Outstanding perfor­mance and ease of use

I really count on Sony at the
Montreux Jazz Festival; all my HD
video and audio recordings are
made using Sony products. One of
the best things about Sony
products is their compatibility,
even between consumer and
professional equipment. And
thanks to the compact size of Sony
video cameras and digital cameras,
I’ve been able to assemble an
extensive library of candid shots of
many artists.

Sony
Products File

01–06

A look inside Sony’s DNA

“To establish an ideal factory that stresses a spirit of freedom and open­mindedness, and where engineers with sincere motivation can exercise their techno­logical skills to the highest level”

This statement of the purpose of incorporation from Sony’s Founding Prospectus
continues to define “Sony’s DNA,” guiding the activities of Sony engineers who
develop new technologies and products. Today, those tackling the challenge of
devising new Sony products are motivated by a single thought—to create unique
products that inspire and bring joy to consumers. The following pages take a close
look at some of these products through interviews with the developers who helped
bring them to life.

11

Enjoy a realistic television picture
anytime, anywhere

Television powered by Wega Engine
technology

With the Wega Engine’s high-quality
picture image circuit, users can enjoy the
same breathtaking picture on any
television—LCD Wega, plasma Wega or
Grand Wega.

The Wega Engine’s high-quality picture image circuit

Studio Application, a function
that combines Sony’s expertise
in many fields

Record television programs onto a
Memory Stick and enjoy watching them
anywhere on cellular phones or personal
digital assistants.

File 01: Flat panel television “WEGA”

[KDE-P61-HX2N]

http://www.sony.net/

A stylish remote control that’s
easy to use

The Wega’s aluminum remote control
reflects Sony’s commitment to style and
functionality. Operation is as easy as
pressing the Wega Gate button and using
the jog dial to navigate the control panel
on the television screen. The jog dial
enables the smooth execution of desired
actions from the control panel menu,
which is arranged conveniently by
function.

Making the television experience

more realistic and user friendly

Powered by Wega Engine
High-definition technologies and high resolution
differentiate Sony’s televisions

Sony has almost half a century of experience in
television development. Throughout its history,
Sony has pursued the ideal in picture quality—
“realism”—by bringing transparency, depth,
sharpness and vibrant color together on the
television screen. The Trinitron television, Wega,
the culmination of Sony’s efforts to create the
ideal picture, has inspired and impressed people
everywhere.

The arrival of the broadband era has created an
environment ripe for enjoying an array of content
at home. Moreover, with digital broadcasting
becoming mainstream, demand is expanding for
televisions with higher resolution. To achieve the
same remarkable picture quality made possible
by the Trinitron display technology in plasma and
LCD televisions, as well as in the Grand Wega
rear-projection television, in 2001 Sony embarked
on a project to develop Wega Engine, a high­quality, integrated digital picture system, that
capitalizes on Sony’s image processing expertise.

The most distinguishing feature of Wega
Engine is its ability to adapt to the characteristics
of various display devices, digitally processing a
variety of input signals to generate an exception-

12

ally sharp and realistic picture. Drawing on the
expertise of Sony engineers with decades of
experience in analog signal processing, the Wega
Engine’s circuitry can produce a high-quality
picture from digital and analog input signals alike.
The Wega Engine’s picture was created by opti­mizing the four key elements that determine
image quality—brightness, contrast, color com­patibility and sharpness—and was evaluated
extensively in line with Sony’s “realism” ideal.

With Wega Engine, Sony has succeeded in
combining imaging technologies it has cultivated
over the years to create a new digital technology.
This has facilitated the development of a televi­sion with a picture so realistic that it can, for
example, precisely reproduce the natural color
and depth of a red flower, thereby creating an
entirely new dimension of viewing excitement.

Wega Gate and Studio Application—Intuitive
controls for enhanced enjoyment

Today’s televisions often come with complicated
remote controls with multiple buttons and thick
owner’s manuals that confuse many users. After
giving considerable thought to this problem,
Sony’s Product Planning Managers came up with
Wega Gate. A push of the Wega Gate button on
the television remote control brings up a control

panel on the screen that enables the user to per­form a variety of tasks intuitively. Sony has also
developed Studio Application, which allows users
to watch digital images from a video camera
Handycam and television programs stored in a
VAIO PC on a Wega television. This function was
developed in response to user demand for the
ability to copy recorded television programs and
other content onto a Memory Stick for viewing on
cellular phones or personal digital assistants. With
its firm commitment to both picture quality and
ease of use, Sony achieved the leading share of the
global television market* in the fiscal year ended
March 31, 2004.

* Indicates share of the total global market (by value) for

CRT, rear-projection and flat panel televisions.

Yoshihiro Yamamoto

General Manager
Systems Technology Section
Display Solutions Department
Home Electronics Development Division
Home Electronics Network Company

Noriyasu Yamada

Product Planning Manager
FTV Product Planning Section
Product Planning Department
Television Business Division
Home Electronics Network Company

Setting up a program recording
has never been easier

Simply choose a program that you want to
record from the electronic program guide
(EPG). Search for a program recorded on the
hard disc drive (HDD) by its title or use the
keyword recording function, which takes full
advantage of the EPG, to automatically
locate and record all programs related to a
particular keyword. With the “Manage
game extension” function, the recording
time of the baseball game or soccer match
will be extended automatically so that you
don’t miss the end of the event.

File 02: DVD recorder “Sugoroku”

[RDR-HX10]

Compatibility with various disc
formats for stress-free
recording

Dual RW compatibility means the unit
can record and play DVD+RW and DVD­RW discs, both rewritable formats. It also
accepts DVD-R discs, providing even
more versatility.

I want to record programs
without worrying about how
much space is left on the HDD

Equipped with a large capacity HDD, the
unit can store many hours of programs,
even those recorded in the highest
picture quality mode. Worrying about
the amount of time left on a videotape
is a thing of the past. Simply record the
programs you want and enjoy them at
your leisure.

Sugoroku’s EPG

I want to copy something onto
a DVD as quickly as possible

Recording from the HDD to a DVD-R can
be performed at a maximum speed of
24x, so it only takes about 150 seconds
to copy a one-hour program. It’s also
possible to delete unnecessary scenes
when making a copy.

http://www.sony.net/

I want the same picture quality
even after watching a
recorded program repeatedly

The unit is equipped with both HQ+, a
high-quality recording mode, and
Dynamic VBR Dubbing, a function that
enables high resolution dubbing of
programs to a DVD. Both allow you to
enjoy high-quality recordings of your
favorite programs over and over again.

Automatic recording of your favorite programs

and many other amazing features

Introducing a DVD recorder with intelligent
recording functionality

Sony has earned a solid reputation for devising
new ways to record television programs through
the launch of such products as the Clip-On hard
disk recorder and the CoCoon channel server. As
the market for DVD recorders began to take off in
early 2003, particularly in Japan, consumers and
retailers began to have high expectations for the
Sony DVD recorder. Determined to develop a
unique DVD recorder, a team of Sony engineers
were at that time involved in the Sugoroku
(“amazing recording”) Project, the goal of which
was to develop a DVD recorder like no other.

Sony’s Sugoroku DVD recorder was an immedi­ate hit following its fall 2003 launch in Japan. The
unit is packed with intelligent recording functional­ity. First, in order to appeal to the large number of
Japanese customers who record TV programs, the
unit features DVD+RW/-RW/-R disc compatibility. It
also incorporates an electronic program guide
(EPG), along with an automatic recording function
based on keywords. For example, if a user enters
“football” as a keyword, the unit will search
through the EPG and record programs that are
associated with “football.” In addition, the HQ+
recording mode allows users to make high-quality
recordings of programs. To store programs recorded

through the automatic recording and HQ+ record­ing modes, the unit has a 250GB hard disc drive
(HDD) with enough space for up to 325 recorded
hours. The Sugoroku DVD recorder was made
possible by a combination of the engineering
team’s determination and accumulated know-how
within the company.

The HQ+ recording mode for outstanding
picture quality and Dynamic VBR Dubbing—
The pride of Sony engineers

The Sugoroku DVD recorder has many technolo­gies that cannot be found on conventional models.
One technology is the HQ+ recording mode, which
records a program onto the hard disk at a rate of
approximately 15Mbps. This recording mode is
based on a technology that Sony engineers had
long been working on for producing recordings
with a picture quality indistinguishable from that of
a live broadcast.

Dynamic VBR Dubbing, a new technology used
for dubbing programs from the hard disk to a DVD
has also been successful. Inspired by methods used
to create software for DVDs such as movies etc.,
Sony engineers succeeded in minimizing picture
degradation by allocating the optimum amount of
data based on the amount of information con­tained in each scene, when a program is recorded

onto the DVD. This makes it possible to make
high-quality dubbing, efficiently utilizing the
capacity of DVDs. It also allows dubbing onto
both DVD+RW and DVD-RW/-R formats.

Yoshihiro Saitoh

Recorder Strategy Manager
Product Planning Section 1
Product Planning Department
Video Group
Home Electronics Network
Company

Hitoshi Hiraga

Senior Manager
Section 1
Department 1
DVD Division
Video Group
Home Electronics Network
Company

Jun Watanabe

Senior Manager
Section 4
Video Products Software Department
Software Technology Division
Home Electronics Development Group
Home Electronics Network Company

13

The remote control should be
simple and fun to use

The cross-shaped menu, with controls
aligned vertically, permits smooth and
speedy operations. Press any button
and the action on the screen will
immediately stop, as the image fades
into the background. Never before has
the operation of a remote control
been so easy.

File 03: DVD recorder “PSX”

[DESR-7100]

I want to connect my PSX to
lots of other equipment

PSX comes with a game controller
port, a network port for online
gaming like that on PlayStation 2
(PS2), a USB socket for PS2­compatible keyboards and
peripherals, a Memory Stick slot and
much more.

I want a design that goes
with my living room décor

PSX has a stylish design and is only
312mm in width, permitting the unit
to be placed vertically if desired.
Translucent white was chosen so that
the unit would be a handsome
addition to any room.

http://www.sony.net/

I want the freedom to be
able to play games even
while recording a television
program

PSX is compatible with both
PlayStation and PS2 software and
online games. You can even play
games while recording a television
program.

PSX—A world of entertainment in one box

An industry first: The convergence of games and
electronics in a single unit
Enhanced user control thanks to a GUI that is
supported by PlayStation 2 technology

PSX arose from the idea of making a consumer
AV product using state-of-the-art semiconductor
technology developed for PlayStation 2 (PS2)—
the world’s number one home gaming system,
from Sony’s game business. PSX drastically alters
the image of DVD recorders, with differences
extending far beyond its functionality and design.
The feeling of direct control that users experience
is unlike that of any conventional AV device. How
did Sony accomplish this? The answer lies in two
semiconductors at the heart of PS2: the
EmotionEngine (EE) CPU and the Graphics Syn­thesizer (GS) image processor. In PSX, both the EE
and GS are on a single chip, a feat made possible
by Sony’s unprecedented advances in semicon­ductor engineering and manufacturing. Further­more, the tremendous amount of time and
energy taken by engineers to perfect the graphi­cal user interface (GUI) is reflected in its unparal­leled usability. Their efforts were not wasted. The
GUI is by far the most popular feature of PSX.

14

A world of entertainment
Enjoy television, DVDs, music, photos and games on
a single unit

Sony had a simple objective: to create a compre­hensive entertainment device that can be enjoyed
by everyone, not just a particular user group.
Priority was thus placed on engineering a product
that maximizes usability while providing such basic
functions as an electronic program guide (EPG) for
television timer recording, a high-capacity hard
disc drive (HDD) for recording and a DVD recorder.

As a comprehensive entertainment device, the
PSX houses music, photo and game functions, in
addition to the DVD recorder. Recording music
CDs to the HDD transforms PSX into a jukebox.
Inserting a Memory Stick from a digital still
camera allows you to view photos on a large
screen television. Or you can simply enjoy a PS2
game. PSX is packed with possibilities.

The new PSX model, released in July 2004, has
up to 50 DVD menu, making it easy to choose
from your favorite titles when recording material
onto a DVD, making PSX an increasingly powerful
means of enjoying a world of entertainment
content from the comfort of your living room.

The achievement of a team of engineers who
were willing to tackle unprecedented challenges, PSX
is the first product line to result from Sony’s conver­gence of its electronics and game technologies.

Yuichi Yazawa

Senior Manager
Section 2
Video Products Software Department
Software Technology Division
Home Electronics Development Group
Home Electronics Network Company

Kenji Matsuoka

Senior Manager
Product Planning Section 2
Product Planning Department
Video Group
Home Electronics Network Company

I want to see LCD television­quality images on my PC

This PC is equipped with Sony’s exclusive
high-quality picture image circuit Motion
Reality. There’s also a fast response 20­inch television-grade LCD screen
equipped with broad viewing angles.
Furthermore, the Clear Black LCD delivers
a vivid picture with excellent quality
contrast and brightness even when
displaying light colors or jet black.

High-quality picture image circuit Motion Reality

I only want to see the
keyboard and mouse when
they’re needed

With a wireless keyboard and mouse,
VAIO type V eliminates the need for any
kind of wired connection. The keyboard
and mouse can be put away until
they’re needed again.

File 04: PC “VAIO”

[VGC-V201]

http://www.sony.net/

Can a PC double as both a
video deck and DVD recorder?

The hard disk drive (HDD) in the VAIO
type V can record up to approximately
103 hours of television programs. The
timer function, used to record programs,
can also be set via the Internet.

It would be great if I could do
everything with a remote
control

The stylish remote control is an integral
part of this PC. At the touch of a button
you can watch television, enter a timer
recording setting, change channels,
adjust the volume or perform various
other tasks.

The VAIO type V’s AV entertainment menu

Chapter two of the VAIO story:

Television picture quality on your PC

Picture quality virtually indistinguishable from an
LCD television—The VAIO type V’s picture quality
has broken the conventions for a PC

Since its debut in 1996, VAIO PC has enhanced
the AV experience of the user through the con­vergence of audio and visual contents and Sony
took the industry lead through the introduction of
a function that allows users to watch television on
their PC. However, watching television on a PC
used to present problems as, due to the limita­tions of the PC format, the quality of the televi­sion images tended to deteriorate as the screen
size increased. In the search for a solution to this
problem, the developers of VAIO turned their
attention to the television technology of Sony’s
Wega, which facilitates outstanding picture qual­ity. This technology uses a powerful IC chip that,
through Sony’s unique high-quality picture image
circuit Motion Reality, allows the high-quality
display of video images. The engineers thought if
this chip could be utilized, they might be able to
produce images of television quality on a PC
screen. At this point, the developers of VAIO
embarked on a project that would confound the
conventional logic of the PC.

Until then, problems involved with viewing

television on a PC screen had been overcome

through the clever utilization of software or the
optimization of hardware performance. However,
whereas a television screen displays a single, full­screen image, on a PC the user has the ability to
alter the size of the window, containing the
image as they see fit. Therefore, to produce a
television-quality image on a PC, engineers had to
overcome the challenges of adapting a chip
originally developed for AV devices; optimizing its
performance for the PC; and allowing television­quality images to be displayed on the adaptable
window sizes of a PC.

VAIO type V is the result of these efforts. Its
20-inch screen generates television images with
quality on a par with those of an LCD television.
With its dazzling picture quality, this new VAIO is
pioneering uncharted territory for PCs.

Never before could a PC have delivered this kind
of enjoyment
But even then, Sony’s engineers chose not to stop

If VAIO type V can be used like a television, then
why can’t it also be used, at the user’s discretion,
to watch television anywhere in the home? To
allow this, the new VAIO has a tilting mechanism
that can be used to angle the screen downward,
a first for a PC. But there’s much more: a 360-

degree swivel stand; a wireless keyboard and
mouse; speakers that deliver high-quality dynamic
sound over a larger area; minimal fan noise; and
much more. All these features add up to make
the VAIO type V everything its creators intended:
a revolutionary PC that is as easy to use as a
television. The PC is also installed with an MPEG
hardware encoder board that can make high­quality recordings of television programs. A single
remote control handles everything from television
functions to hard disk recordings and DVD opera­tions. The concept of AV and PC convergence,
central to the VAIO lineup, is now entering a new
phase—one that will open up a new chapter in
PC history.

Yoichiro Hachiya

Assistant Manager
Product Planning Dept.
IT Company
IT & Mobile Solutions Network Company

Naoki Kameyama

Senior Engineering Manager
Hardware Design
Section 3, Department 4
IT Company
IT & Mobile Solutions Network Company

15

I want a compact camera that’s
slender, yet durable

Miniaturizing CCD to create an ultra­compact, high-resolution digital still camera
was a challenge. Stainless steel was chosen
for the body material of the 17.3mm thick
digital still camera because of its strength
and resilience. The aluminum alloy sliding
cover protects the lens and also serves as
the power switch.

This 5.1 megapixel CCD is approximately
half the size of a conventional CCD.

I want to share my pictures with
friends and family immediately after
taking them

DSC-T1’s large 2.5 inch LCD monitor is
nearly three times the size of a 1.5
inch LCD monitor. The large
monitor makes it simpler to
compose photos and easier
to playback and share photos
with friends and family by using
the monitor as a display.

17.3mm

2.5 inch LCD monitor

File 05: Digital Still Camera “Cybershot”

[DSC-T1]

http://www.sony.net/

I don’t want to miss another great shot

Equipped with Sony’s proprietary Real Imaging
Processor, the camera powers up in about 1.3
seconds, takes approximately one second between
shots and has a shutter lag of about 0.24 seconds and
a release lag of about 0.009 seconds.

I want to enjoy taking photos using a
camera equipped with a Carl Zeiss lens

The newly designed folded-optics lens system was jointly
developed by Sony and Carl Zeiss. The system was
designed specifically to keep the lens within the camera
body and features a 3x optical zoom. Another unique
feature is the Magnifying Mode, which allows users to
shoot objects from as close as a centimeter away.

Newly designed folded-optics lens system

The new Cybershot:

Fun to carry around and take photos

Cybershot DSC-T1—The result of Sony’s desire to
create an entirely new digital still camera

Featuring a large, easy-to-see LCD monitor and

5.1 megapixel CCD in an ultra-compact, slim
body, the Cybershot DSC-T1 has been a best­selling digital still camera in many countries since
its initial release in Japan in fall 2003.

About a year and a half ago, a group of young
engineers, determined to create a new digital still
camera unlike any before it, got together to
develop a next-generation model. The team
started from scratch, rethinking every aspect,
from product concept and design to components.
For example, CCD required a high, 5.1 megapixel
resolution, but also needed to be about half the
volume of a conventional CCD to achieve an
ultra-compact, slim size. A retractable zoom lens
would have made the camera too bulky. The
solution was a folded-optics lens system, co­developed with Carl Zeiss, which moves within
the camera body instead of projecting in and out.
The result is a unique, ultra-compact, slim camera
with a 3x optical zoom. Further distinguishing
DSC-T1 is a 2.5 inch hybrid LCD monitor that uses
nearly half of the camera’s surface area. This large
display is one more reason this revolutionary
digital still camera continually amazes users.

16

A simple design with capabilities that people
appreciate more with use

Unlike a conventional camera, which has the lens
in the center and is held with two hands, the
innovative design of DSC-T1 was intended to
attract people’s attention. On the front is a sliding
cover made of aluminum alloy that protects the
lens. A specially coated stainless steel was used
for the camera’s body to prevent tarnishing and
preserve its beautiful appearance over the years.
The sliding lens cover also serves as the power
switch. Users can take out DSC-T1 from a shirt
pocket with one hand, open the lens cover,
switch the power on and snap a photo all in one
motion. DSC-T1 incorporates Sony’s latest ad­vanced technologies, including a 5.1 megapixel
Super HAD CCD, Sony’s proprietary Real Imaging
Processor and a thin, high-capacity InfoLITHIUM
T-type battery. Incorporating these technologies
into such a compact space in DSC-T1 represented
yet another plunge into uncharted territory for the
project team. This achievement enables users to
immediately view and share photos with friends and
family on the large 2.5 inch LCD monitor, a capabil­ity no conventional digital still camera can match.

Yasushi Noda

Product Manager
Group 2
Product Design 2 Department
DSC Division
Personal Imaging Company
IT & Mobile Solutions Network
Company

Koichi Tanigawa

Department No. 2
Imaging Technology Group
IT & Mobile Solutions Network
Company

Atsushi Kawase

Senior Art Director
Design Center

There is no danger of mistakenly
recording over other material

DVD Handycam uses a DVD with a diameter of
8cm. It automatically records new material onto
unused disc space, so there is no need to fast
forward or rewind, or worry about mistakenly
recording over other material.

Rewritable DVD

DVD editing is easy

By using a DVD-RW disc in Video Recording
(VR) mode, DVD Handycam functions as a
simplified editing tool. Users can easily erase
unwanted scenes, split and rearrange scenes,
and perform other basic editing functions.

File 06: Video Camera “DVD Handycam”

[DCR-DVD201]

http://www.sony.net/Products/handycam/

It has never been easier to dub
content and send it to family
and friends

Material stored on DVD Handycam can
be dubbed for family and friends by
using either a DVD recorder with a hard
disk or a PC.

I want to be able to find any
scene I want quickly

With DVD Handycam’s Visual Index
function, the content on the disc can be
checked at a glance. To play a specific
scene, simply select it from the on­screen display.

Example of a Visual Index

Capture it on DVD and watch it on a DVD player

The first-generation consumer DVD based video
camera, DVD Handycam, was a huge hit in the U.S.
In developing the next generation of models,
further miniaturization is the key

Sony’s video camera, DVD Handycam, was a
major hit in the U.S. market during the fiscal year
ended March 31, 2004. As the name suggests,
unlike other conventional video cameras, DVD
Handycam uses a DVD as its storage medium.
Material recorded on the DVD can be viewed
right away on a DVD player at home or can be
copied to another DVD for friends and family. Its
light weight, in particular, has made it very popu­lar among many users, especially among families
who want to capture memories of their children
growing up or family vacations.

Sony’s next goal was to make an even smaller
DVD Handycam so that even more people could
enjoy this technology, and a project team was
established with this aim in mind. Smaller size
naturally requires both smaller components and
lower power consumption. While smaller compo­nents reduce the overall size, the circuitry would
overheat if the same level of power were to be
used. Sony engineers solved this problem by
adopting the Intermittent Recording Method, a
technique that is not possible with a videotape.
Normally, when recording to a DVD, the data of

the moving image is simultaneously saved in the
memory and written onto the disc by laser, and it
is this part of the process that consumes the most
energy. Using the Intermittent Recording Method,
disc recording is twice as fast as normal speed,
meaning that recording takes half the time,
thereby lowering power consumption. This inno­vative approach has facilitated a level of energy
efficiency that eliminates the risk of overheating
and has enabled this second-generation DVD
Handycam to be 30% smaller in size than the
first-generation model.

Taking advantage of features unique to DVDs

One of the biggest challenges in using a DVD
rather than a videotape for this video camera was
the problem of vibration. A shock or jolt can
interrupt the recording process on a DVD, in the
same way that a bump can cause the needle of a
record player to jump. To solve this problem, Sony
engineers applied their broad knowledge of drive
mechanisms, software and electronic circuit
technology to create a mechanism that is capable
of precisely offsetting the force of an external
shock. However, there are many other types of
vibrations and jolts that the video camera must be
able to cope with. During a testing phase that
was nicknamed the “Vibration Project” by those

involved, Sony conducted repeated and rigorous
testing on nearly 100 types of vibration and
impact right up until the start of mass production.

Engineers also focused on achieving an image
with the highest possible resolution by utilizing
Variable Bit Rate (VBR) Recording. With this tech­nique, a fast-moving scene is recorded at a higher
bit rate, while a slower bit rate is used to record
scenes with less movement. Because bit rate
adjusts according to the volume of visual data,
the capacity of the DVD is more efficiently utilized
and picture quality is significantly enhanced.
Another advantage of this technique is that there
is less digital noise compared to Constant Bit Rate
(CBR) Recording, thereby making it possible to
record a wide range of subjects with the same
consistently high-quality picture.

For the next generation of DVD Handycam,
Sony engineers are working hard to pull a few
more exciting surprises out of the hat for video
camera users around the world.

Tadayuki Miyamoto

Project Leader
Design 2 Section 2 Group
Camcorder Business Section
Personal Video Company
IT & Mobile Solutions Network
Company

Yukiko Sakota

Planning Group
Personal Video Product Planning
Section
Personal Video Company
IT & Mobile Solutions Network
Company

Masahiro Shigenobu

Project Manager
Media Technology 3 Group
Camcorder Business Section
Personal Video Company
IT & Mobile Solutions
Network Company

17

The future of key components

To reinforce its competitive strength in its core electronics business, Sony is seeking to differ­entiate its products by implementing a vertically integrated business model that incorporates
internally produced proprietary semiconductors, modules and components. Key components
include Cell, a next generation, multi-purpose microprocessor; imaging components, such as
CCDs and CMOS image sensors; display components, such as LCDs and organic electrolumi­nescence (OEL) displays; Memory Stick; optical devices; and lithium-ion batteries. These
components are essential for producing highly competitive products.

Cell: The next generation, multi-purpose microprocessor

Differentiating products by strategic
component

Over the years, Sony’s ability to develop such
proprietary key components as Trinitron and
CCD internally has been instrumental in creat­ing numerous appealing products, and has
been the foundation of Sony’s evolution.
PlayStation 2 (PS2), for example, features the
EmotionEngine (EE), a 128-bit CPU incorporat­ing highly advanced technology, and the
Graphics Synthesizer (GS), a high performance
image processor. Since its debut, PS2 has
revolutionized the game console market. As
the vital role played by EE and GS in the
success of PS2 showed, highly differentiated,
advanced semiconductors are essential in order
to open up new markets. Currently, Sony is
developing a new microprocessor, Cell, which
is ideally suited for the upcoming era when
the proliferation of broadband networks will
enable people everywhere to enjoy high­resolution images.

The heart of next generation digital
consumer electronics

The concept behind Cell is to evolve the con­ventional microprocessor, which is more of a
narrowband data processor that computes text
and still images mainly for PCs into a broad­band data processor for game consoles and
high-definition televisions. Connecting several
multiple processors using a home network or

an IP broadband network will create a process­ing capability that far exceeds that of a single
processor. The name Cell reflects Sony’s belief
that stand-alone microprocessors will be con­nected through a broadband network and will
evolve to become a single global processor, in
the same way as organic cells combine to
create a living organism. Accordingly, network­enabled devices, including consumer electron­ics equipped with Cell, will become a structural
element of the broadband network itself.

Strategic alliance with IBM and Toshiba
expedites the development process

In March 2001, the Sony Group reached an
agreement with IBM Corporation and Toshiba
Corporation to collaborate in research and
development to create the architecture for a
new microprocessor, Cell, which it envisions as
the foundation of the next generation broad­band network era. Combining their respective
strengths and technologies, the three compa­nies expect to invest more than $400 million in
this project over five years. By incorporating
several of today’s most advanced semiconduc­tor manufacturing technologies, such as cop­per interconnects, a silicon-on-insulator (SOI)
process and low-K dielectric material, the
project aims to create a microprocessor that is,
in effect, a supercomputer on a chip.

Investment to facilitate production of
semiconductors for 65 nanometer process
technology—the most advanced in the world

Preparations are under way to fabricate Cell
and a variety of media processors in three
locations: Sony’s Nagasaki Fab; an IBM manu­facturing facility in East Fishkill, New York; and
a Toshiba manufacturing facility in Oita, Japan.
In the fiscal year ended March 31, 2004, the
Sony Group recorded capital expenditure of
about ¥69.0 billion for the first stage of
construction of a mass-production facility for
semiconductors that use 65 nanometer (one
nanometer equals 1/1,000 of a micrometer)
process technology. Additional capital expendi­ture of about ¥120.0 billion is planned for the
second stage of construction, beginning in the
fiscal year ending March 31, 2005. Trial opera­tions at each of the three locations are sched­uled to commence during the first half of

2005. Combined monthly production capacity
of the three facilities for 300mm wafers is
expected to be approximately 15,000 wafers.

18

Taking the initiative to lead the broadband
network era

Digital consumer electronics and network­enabled devices, which support games, music,
pictures, digital broadcasts and many other
broadband applications, will be the leaders of
the broadband network era. Accordingly,
semiconductors, the key strategic components
in these products, will be one of the key
sources of Sony’s competitiveness.

A chip combining the EE and GS

“Sony’s goal is to be a manufacturer of the world’s preeminent
semiconductors”

Interview with Ken Kutaragi, Executive Deputy President, Corporate Executive Officer

Why are these components so important
to Sony?

Many people believe that digital consumer
electronics goods will become
“commodified,” that is, inexpensive enough
for anybody to buy, thereby preventing
manufacturers from making a profit. In fact,
nothing could be further from the truth. Of
course, it is true that, manufacturers cannot
create any added value by simply procuring
components and using them to assemble
their finished products. However, the story is
different for companies that in addition to
being able to manufacture key components
themselves utilizing their own distinctive
technologies, and being able to take advan­tage of mass production technology, can also
capture the imagination of consumers. An
enormous amount of value can be added in
this manner. For example, Sony’s Handycam
video camera and Cybershot digital still
camera are making large contributions to our
earnings. That is because we produce CCDs,
the camera’s “electronic eye,” LCD panels,
batteries and other advanced components
ourselves. This allows us to create more com­petitive, value-added products. The shift of
management resources in order to concen­trate on key components is essential to our

pursuit of implementing a vertically inte­grated business model that will enable us to
create distinctive new products.

Exactly what kind of components are there?

In order to differentiate our products, we
must develop components for display, imag­ing, storage, semiconductor and many other
types of devices. Among these components,
semiconductors are considered to be the
most important key component, based on
the plans for our future product lineup. In
the near future, semiconductors will become
ever more miniaturized, enabling a vast
number of transistors to be incorporated
onto one chip. The development of this
semiconductor technology will enable the
realization of a diverse range of ideas and
architecture, meaning continued conver­gence of added-value on the semiconductor.

In addition, as the resolution of displays
improves, there will be more demand for
even better picture quality, whether for
video or still photos. This trend points to an
even more important role for CCDs and
other imaging components used in video
cameras and digital still cameras.

What kind of measures is Sony taking to
secure a stable supply of key components?

To meet the explosive growth in demand
that is foreseen for digital consumer elec­tronics, we are currently making substantial
investments in the construction of manu­facturing facilities for key components.

For example, to manufacture Cell we
must introduce state-of-the-art semiconduc­tor production technologies and facilities.
We are working with IBM and Toshiba to
put in place a highly sophisticated mass­production infrastructure.

As for display components, we are striving
to enhance our manufacturing capability of
amorphous silicon TFT LCD panels, enabling
us to keep up with the expected growth in
demand for LCD televisions.

19

Image sensors Display components Memory Stick

Tapping the strengths of CCD and CMOS
image sensors

Sony has the leading share of the global mar­ket for CCDs. This key component not only
supports our lineup of mobile products, such
as digital still cameras and video cameras, but
also contributes to profitability through sales
to external customers. In July 2003, Sony was
the first company to develop a CCD for con­sumer digital still cameras that has a four-color
filter: red, green, blue and emerald. This break­through will be leveraged to differentiate Sony
cameras from those of its competitors. We will
also strive to make the CCDs smaller, while
simultaneously enhancing picture quality.

Sony is also developing CMOS image sensors.
This component offers the advantages of low
power consumption, faster processing speed,
and the ability to place peripheral circuitry on a
single chip. Traditionally, picture quality from
CMOS image sensors has been thought to be
inferior to that of CCDs. Sony has almost
completed work on a CMOS image sensor that
produces a higher-quality picture. This is being
accomplished by applying manufacturing know­how that was gained from the production of
CCDs and using sophisticated equipment for
the MOS process. Sony will continue its CMOS
image sensor development program with the
goal of expanding this business.

Joint venture with Samsung to mass­produce next generation LCD panels

Demand for flat panel displays is increasing
rapidly, with applications for this technology
ranging from cellular phones, digital still
cameras, televisions, PC monitors and rear­projection televisions. To ensure a stable
supply of LCD panels to meet the expected
growth in demand for large screen LCD
televisions, Sony and Samsung Electronics Co.,
Ltd. established S-LCD Corporation. This joint
venture will develop and manufacture seventh­generation (1,870mm x 2,200mm glass sub­strate) amorphous silicon TFT LCD panels to be
used in large screen televisions. Full scale pro­duction is scheduled to begin in the fiscal year
ending March 31, 2006.

A rear-projection television with an ultra
high-resolution LCD

As LCD panels with increasingly high-resolution
become available, even small devices will have
the ability to display ultra-fine images. Sony has
developed a display device called the SXRD
(Silicon X-tal Reflective Display) that can pro­duce high-resolution, high-contrast images with
cinematic quality. Sony will use SXRD to pro­duce front projectors and rear-projection televi­sions that will have a far better picture quality
than those currently available.

Meeting the new demand for increasingly
widespread music distribution and high­resolution video recording

Since its debut six years ago, the Memory Stick
business has continued to grow rapidly, fueled
by the growth of the digital still camera market.
As a result, cumulative shipments have sur­passed 70 million units. Sony and more than
500 other companies that support this technol­ogy are developing new markets for Memory
Stick. Music and e-book distribution services are
two applications that will be added during the
fiscal year ending March 31, 2005, with high­resolution video recording as another potential
addition. To ensure ease of use for a broad
range of applications, all Memory Stick media is
equipped with copyright protection technology
and high-speed data transfer capability. Sony
plans to launch higher-capacity media with the
introduction of a 2GB version in 2004 and a
4GB version in 2005.

Memory Stick PRO

Memory Stick PRO Duo

CCD with a four-color filter

20

Practical application for OEL displays

OEL displays can reproduce highly vivid colors
with the fast response required for smooth
video playback. Backlighting is not required
because the panel is self-luminescent, produc­ing three colors: red, green and blue. This
allows for panels to be extremely slim. Sony is
working toward the practical application of the
OEL display to mobile devices.

LCD display component, “4K SXRD”

Memory Stick

Memory Stick Duo

Lithium-ion batteries

Optical disc components and digital tuners

Supporting Sony’s mobile products

Demand for rechargeable lithium-ion batteries is
rapidly growing due to its use in a diverse range
of mobile devices, such as notebook PCs, cellular
phones, digital still cameras and video cameras.
With superior safety and high performance,
Sony’s lithium-ion batteries have contributed to
making Sony’s core mobile devices, such as the
digital still camera Cybershot, VAIO PCs and the
video camera Handycam, more slender and
compact. There is no doubt that these batteries
will play a greater role in Sony’s strategy to dif­ferentiate its mobile products by making them
even slimmer and lighter.

Aiming to increase sales of lithium-ion
batteries

Sony has secured firm positions in the markets
for both the liquid-electrolyte lithium-ion bat­teries used in notebook PCs and the lithium­ion polymer batteries used in cellular phones.
To reinforce its leading position in the note­book PC battery market, Sony will continue to
increase the capacity and output of liquid­electrolyte lithium-ion batteries. In 3G and
subsequent generations of the cellular phone
market, the goal is to increase sales by taking
advantage of the high capacity and light
weight of polymer batteries, which give them
the flexibility to fit any size of cellular phones.

Opportunities also exist for using lithium-ion
batteries in electric tools, shavers and other
products that currently use nickel metal hydride
batteries. Sony is currently making inroads into
these market segments.

Prismatic
liquid-electrolyte
lithium-ion
battery

Cylindrical
liquid-electrolyte
lithium-ion
battery

Lithium-ion
polymer battery

Concentrate our energies on high-density,
high-speed recording technology for optical
disc components

Sony manufactures semiconductor lasers,
optical pickups and other components used in
CD and DVD players and recorders, PlayStation
2, disk drives for PCs, the video camera DVD
Handycam and other products. Sony is the
industry leader in the field of optical pickups for
audio-visual equipment. Currently, demand for
DVD optical pickups and semiconductor lasers is
increasing, due to the growing diffusion of DVD
players. To further expand this component
business, work is under way to commercialize
recordable dual-layer DVDs and an optical
pickup and semiconductor laser with 16x
recording speed. In addition, Sony has devel­oped a three-wavelength optical pickup and
semiconductor laser that are compatible with
the Blu-ray Disc, DVD and CD formats.

Blu-ray Disc

The Blu-ray Disc format

The increase in high-definition broadcast pro­grams is sparking demand for technologies
capable of recording outstanding picture and
sound quality. In response, Sony and eight
other companies signed an agreement in Febru­ary 2002 and formed the Blu-ray Disc Founders
(BDF), to promote the rewritable Blu-ray Disc
standard. While promoting the Blu-ray Disc
standard with members of the computer, media
and other industries, the number of BDF mem­bers has increased to 13*. To establish the Blu­ray Disc standard and capitalize on business
opportunities, BDF has decided to establish the
Blu-ray Disc Association (BDA), which solicits the
participation of companies from a wide range
of industries.

Quick to respond to the opportunities of
digital broadcasting

Sony has developed an ultra-compact digital
tuner that can receive terrestrial digital broad­casts. The industry’s smallest tuner measures
18mm x 14mm x 2mm, weighs only 1.5 grams
and is also low power consumption. Sony
plans to use this digital tuner in a variety of
mobile devices.

■

Sales of Sony Optical Pickups

(Million units)

200

150

100

50

2003

20001995199019851982

*Sony Corporation, Dell Inc., Hitachi, Ltd., LG Electronics

Inc., Matsushita Electric Industrial Co., Ltd., Hewlett­Packard Company, Pioneer Corporation, Royal Philips
Electronics, Samsung Electronics Co., Ltd., Sharp
Corporation, TDK Corporation, Thomson, Mitsubishi
Electric Corporation (As of March 18, 2004)

Key technologies underlying the Blu-ray Disc
system

Blu-ray Disc requires at least 27GB of storage
capacity to record two hours of high-definition
television programs. This is about six times the
storage capacity of a standard DVD. Yet the
Blu-ray Disc provides this massive capacity
within the 12cm diameter (and 1.2mm thick­ness) of a CD or DVD. Listed on the following
page are some of the key technologies that
made this possible.

(FY)

21

Blue-violet laser achieves high
recording density

Data on an optical disc is recorded and read by
passing a beam from the laser through the lens
and onto a spot on the disc called the beam
spot. Since blue-violet light has a shorter wave­length than red, it can produce a smaller beam
spot. The result is higher recording density.
Blue-violet lasers with a wavelength of 405
nanometer enable Blu-ray Disc to increase
recording density about 2.6 times, and com­bined with high-powered lenses, the recording
capacity of Blu-ray Disc is six times that of the
standard DVD.

19%100%

0.85

Blu-ray Disc

(simplified diagram)

1.2
mm

DVD

Comparison of beam spot size

1.2
mm

Lens numerical aperture

(approx. doubles density)

0.6

Laser wavelength

(raises density approx. 2.6 times)

650nm 405nm

High-speed data rate of 36Mbps to accom­modate digital content

Blu-ray Disc has a data rate of 36Mbps, much
greater than the maximum speed of 24Mbps
in digital HDTV from a broadcasting satellite
(BS). This speed enables Blu-ray Disc to easily
record digital HDTV programs from the BS and
play them with remarkably high-quality picture.

Blu-ray Disc recorder

In April 2003, Sony unveiled the world’s first
Blu-ray Disc recorder. By using the same MPEG­2TS video recording method used in BS digital
TV broadcasts, this unit can record more than
two hours of BS digital TV programming with
no degradation in picture quality.

The development of three-wavelength
recording/playback optical pickups
that are compatible with Blu-ray Disc,
DVDs and CDs

Sony has developed a three-wavelength record­ing/playback optical pickup that is compatible
with the Blu-ray Disc, DVD and CD. In addition
to reducing the number of components re­quired and decreasing its size, Sony is striving to
increase the optical pickup’s reliability and
productivity, in order to rapidly commercialize
this product. As the key component for the
Blu-ray Disc system, this new optical pickup is
positioned to contribute to the expansion of
this market.

Prototype of the newly developed three-wavelength
optical pickup for recording and playback

0.1mm optical cover layer improves
reliability

On a Blu-ray Disc, data is stored at more than

2.5 times the density of a DVD, while the width
of the recording tracks is less than half that of a
DVD. Furthermore, the tracks where the data is
stored are only 0.1mm below the disc surface.
Placing the recording tracks closer to the sur­face means that Blu-ray Discs are less prone to
problems caused by disc warping and other
factors compared to CDs and DVDs.

Optical cover layer

For 0.6mm thickness

(same as in a DVD)

Blu-ray Disc

Scanning electron
microscope view

DVD-RW

Scanning electron
microscope view

0.6mm

Substrate

Recording

layer

Optical

cover layer

Shortest

recording mark of

0.4μm

Track pitch of

0.74μm

NA 0.85

Optical cover layer

For 0.1mm thickness

0.1mm

Shortest
recording mark

(0.16μm for 23GB;

μ

m for 25GB;

0.149

0.138

μ

m for 27GB)

Track pitch of

0.32μm

Substrate

Recording layer

Optical cover layer

(simplified diagram)

Blu-ray Disc recorder

Success in developing a 25GB optical
disc made of paper

Sony and Toppan Printing Co., Ltd., have suc­ceeded in developing a 25GB paper optical disc
with a paper content of more than 51%. Part of
the disc uses paper because Blu-ray Discs can be
played and recorded on the 0.1mm surface
layer. The use of paper reduces the need for
plastic, making the discs more environment­friendly and decreasing manufacturing costs.

A paper disc

Optical pickup for conventional DVDs/CDs
(top) and Blu-ray Disc (bottom)

Cross-licensing agreement for optical
disc-related blue-violet laser diode
patents

Sony and Nichia Corporation from Japan have
agreed to cross-license patents involving the
Blu-ray Disc format’s blue-violet laser diode. This
agreement is expected to open the door to
Sony’s mass-production of blue-violet laser
diodes, a big step that will position it to respond
to expansion in the market for Blu-ray Disc­format products.

22

Ikebana (the ancient
Japanese art of flower
arrangement) and leading
edge technology don’t
seem like natural partners,
yet Ms. Eikou Sumura has
been using a recordable
Walkman for more than 20
years to refine her teaching
skills in this ancient
art form.

Sony stands

Eikou Sumura

Sony first caught my eye when I was a young child

When I was a child, I was captivated by the Sony products. I saw them at elementary
school and on billboards on the way to school. The novelty of Sony, which was some­how different and “newer” than other electronics, left a lasting impression on me. I
remember reading the autobiographies of Sony founders, Masaru Ibuka and Akio
Morita. I was impressed by their dedication to corporate citizenship. What particularly
struck me was their efforts to create employment opportunities for disabled people.
When I was growing up, like most people in Japan, I was fascinated by American culture.
The Sony Plaza in Ginza was like a variety store offering a slice of American life. It was
an ideal place to see the kinds of things you couldn’t find in Japan back then and I often
went there. Sony has been an important part of my life.

for captivating
products

Good instructors should listen to themselves

I have used a recordable Walkman for more than 20 years. I use it mostly to record myself
explaining the principles of ikebana and giving demonstrations during class. Later when I
play back the recordings they allow me to identify things I can improve on, even things
like the tone of my voice. As a teacher, the ability to hear yourself in the third-person is
extremely important. I strongly recommend this technique to my advanced students
who are teachers themselves.

Eikou Sumura Master Instructor, Sogetsu Headquarters

A native of Tokyo, Eikou Sumura began studying ikebana in 1953 and from 1963, worked as an assistant to her
father, the famous ikebana master Kousoku Sumura. She became a director of the Sogetsu Ikebana Instructors
Association in 1973. Ms. Sumura has traveled the world conducting demonstrations and workshops. Always looking
for new challenges, she recently began collaborating with a French chef.

Eikou Sumura URL: http://www.sumuraeikou.com

Like a memopad, my IC recorder
is always by my side

I bought an IC recorder not long ago, not for recording
my classes but to record ideas that come into my head
or phrases that I don’t want to forget. It’s smaller than
a Walkman, so I can take it with me everywhere. I even
keep it by my bed at night.

23

R&D

research & development

Sony’s DNA: Freedom and
open-mindedness

Sony has created an environment of freedom and open-mindedness
in which its researchers and developers can give free rein to their
imaginations while managing research and development by effi­ciently focusing management resources in strategic fields

Biped robot

Sony’s R&D strategy

The importance of R&D and its management

Sony’s philosophy regarding R&D was set forth
by Masaru Ibuka in the Founding Prospectus
when he established the company: “To estab­lish an ideal factory that stresses a spirit of
freedom and open-mindedness, and where
engineers with sincere motivation can exercise
their technological skills to the highest level.”
Today, Sony carries on its tradition of fostering
freedom in research while concurrently man­aging R&D by efficiently focusing management
resources in strategic fields.

How research priorities are determined

Sony has a virtually unlimited selection of key
technologies. To identify which of these will
have the potential to deliver revolutionary
devices and products, Sony holds the Technol­ogy Round Table, at which senior manage­ment and research engineers gather to
formulate strategies consistent with Sony’s
R&D road map. These Round Tables are also
responsible for determining how management
resources should be concentrated within
strategic fields.

R&D and Sony’s intellectual property strategy

There are many R&D accomplishments that are
of vital strategic importance to Sony. Three
operating units—R&D, business and intellec­tual property—all combine to forge Sony’s
intellectual property strategy, ensuring that
these assets are properly protected and effec­tively utilized.

Sony is acutely aware of the importance of
utilizing intellectual property to reinforce its
competitive edge and, to this end, frames an
intellectual property portfolio suited to each
business unit and determines policy for the use
of each. This approach entails the acquisition
of intellectual property assets for Sony’s exclu­sive use, as well as establishing cross-licensing
rights and taking other actions as required,
giving Sony more flexibility in its business
operations. Moreover, the standardization of
basic technologies has become an increasingly
important issue with the growth of digital
networks in recent years. In response, Sony is
actively pursuing alliances, licenses and other
means to increase the utilization of technolo­gies in its patent portfolio.

Strategic fields for the
next three years

Sony is focusing on semiconductors, dis­plays and home servers as its key strategic
fields for R&D over the next three years

Semiconductors

In electronics, added value has migrated from
finished products to key components. In light of
this, Sony regards the semiconductor business
as one of its most important R&D priorities.
Sony’s semiconductor business has steadily
raised its profile in terms of production value, as
well as in capital expenditure and R&D spend­ing. In the short and medium terms, central
R&D themes will concentrate on functional
components, particularly CCDs, where Sony
holds the number one worldwide market share,
and semiconductor lasers. Another priority is
System-on-Chip (SoC) components, which
integrate an enormous number of processors
and memories. Components incorporating
these technologies play a central role in enabling
Sony to supply highly distinctive digital con­sumer electronics and game products with
increasingly sophisticated functions.

24

Displays

Display technology has been a Sony core tech­nology since the days of the CRT, when Sony
created its highly acclaimed Trinitron system.
Sony is developing next generation display
technologies for LCDs, organic electrolumines­cence (OEL) and projectors to best match
differing market requirements in terms of
screen size and product category. One highly
advanced component is the Grating Light
Valve (GLV) projector, which uses high-output
lasers to produce the three primary colors.
Sony has also developed a Silicon X-tal Reflec­tive Display (SXRD) projector that produces a
high-resolution 8.85 megapixel (4,096H x
2,160V), four times sharper than current
digital high-definition televisions. Development
work continues with the aim of delivering
solutions that achieve remarkable resolution
and color reproduction from content to dis­plays, all with the unmistakable Sony touch.

Home Servers

Home servers are set to become important
fixtures in the home. As digital consumer elec­tronics become increasingly linked through
networks, home servers will be needed to con­trol both the operations of network appliances
and the flow of content. These servers are likely
to function as storage terminals, most likely in
the form of DVD or Blu-ray Disc recorders
equipped with hard disk drives, as well as con­tent service and network portals. Possessing
many of the world’s most advanced technolo­gies in both semiconductor lasers and optical
pickups, Sony is set to become the industry
leader in an emerging network server market
that demands expanded storage functionality
and high-speed transfer rates.

Long-term research fields

The shift from inorganic to organic materials

Inorganic materials, such as metals and silicon,
in addition to mechanical technologies, have
defined much of the technology of the past
century. But a new century has shifted the
spotlight to carbon-based and other organic
materials, as well as biomolecular emulation
technologies. Sony is targeting this shift
through its R&D activities with a mid- to long-

term perspective. The fiscal year ended March
31, 2004, witnessed the first step in this direc­tion, namely, Sony’s announcement that it had
developed a tandem dye-sensitized solar cell
that employs a polymer gel electrolite and
nano-structured electrode. Currently, solar cells
are made of semiconductor materials, such as
silicon and gallium arsenide. Polymers have a

transistors. Sony engineers were not only suc­cessful in proving the operation of these
transistors, but also in utilizing them as the
driving transistor for an LCD that produces a
160 x 120 pixel image.

Sony’s wide-ranging technological expertise
in materials, analysis, circuitry and finished
products made these accomplishments possible.

high energy conversion efficiency of 10.5%.
Moreover, they are inexpensive and enable the
easy creation of a large surface area. At the
time of announcement, this technology had the
highest conversion rate for its type in the world.
In the field of electronic components, Sony
unveiled an organic transistor in February 2004
at the Institute of Electrical and Electronics
Engineers International Solid-State Circuit
Conference (IEEE ISSCC), the world’s most
prestigious international conference for semi­conductor ICs. The fruits of Sony’s research
shed light on the mechanism by which charged
carriers are injected from electrodes into the
organic semiconductor layer. This made possible
a new technology that improves the charge
carrier mobility of electrons within organic

Imitating living organisms and brain
functions

Sony is exploring sophisticated robotics and
computing technology to create robots even
more like living beings.

In December 2003, Sony announced the
world’s first humanoid robot with the ability to
run and jump. Over the mid- to long-term, Sony
plans to further refine these movements while
incorporating the latest advances in perception
technology, as well as utilizing networks so that
robots can acquire knowledge and learn about
their environment. Research continues with the
aim of making robots even more human-like to
the point where people do not tire of them even
after frequent and extended encounters.

R&D activities for the fiscal year ended March 31, 2004

R&D expenses totaled ¥514.5 billion for
the fiscal year ended March 31, 2004,
which amounted to ¥71.4 billion, or 16%,
more than in the previous fiscal year. The
ratio of R&D expenses to sales, excluding
the Financial Services segment, rose from

6.4% to 7.5%.
R&D expenses in the Electronics segment
increased ¥49.1 billion, or 13%, to ¥429.4
billion, while in the Game segment R&D
expenses increased ¥21.9 billion, or 36%,
to ¥83.4 billion.
Within R&D expenses in the Electronics
segment, about 62% was allocated for
product prototype development and the
remaining 38% for new, mid- to long­term technologies for semiconductors,
telecommunications, displays, next genera­tion optical discs and other fields. In the
Game segment, R&D expenses were
mainly allotted for hardware, including
semiconductors and network technology,
and the creation of software.

■

R&D Expenses

(Billion ¥)

433.2

2001 2002 2003

■

Composition of FY2003 R&D Expenses

Game 16.2%

443.1

Others 0.3%

¥514.5

Total:

514.5

billion

Others
Game

Electronics

(FY)

Electronics

83.5%

25

Since the founding of our company, Sony has always sought to deliver new qualia—to captivate and

move people, bringing them joy and excitement—through our products, content and services.

With the “QUALIA Movement”, we express our sincere determination and

great joy in introducing new qualia to the world.

In the electronics field, we will realize the “QUALIA Movement” through our product creation, marketing

and service activities, offering unique emotional value that touches people’s hearts.

http://www.sony.net/QUALIA/

26

27

Sony

How Sony makes its products
Speeding up the manufacturing revolution

Craftsmanship

The art of manufacturing—Adding value and driving Sony’s growth

As one element of “Transformation 60,” Sony is taking a fresh look at its past manufacturing practices
and conducting a worldwide realignment of manufacturing activities. Engineering and manufacturing
capabilities and operating speed are crucial to creating competitive products. By globally reinforcing
these capabilities, Sony believes it can bolster its entire product lineup and enhance profitability.

Constant manufacturing innovation propels
product creation at Sony

Sony views manufacturing as a core competence.
Over the years, Sony has introduced many revolu­tionary products as only Sony can do. To cope with
rapidly changing market conditions, even more
manufacturing innovations are being implemented
at Sony. The aim is to restructure the product
creation framework into a knowledge-intensive
process that can generate added value. One
example of this kind of measure is the widespread
adoption of a highly efficient, flexible production
system called the “cell production method.” Other
ongoing projects involve increasing the output of
devices and modules, upgrading core technologies,
such as high-density mounting, and building an
integrated manufacturing process for semiconduc­tors and components that extends to the point
where they are incorporated on the circuit board
and as parts of products in the assembly process.
Concurrent to this, Sony is assembling a powerful
supply chain management system and raising
overall production-related operating efficiency. The
combined result of these actions is the optimization
of Sony’s engineering and manufacturing systems
for each regional market. Sony is now accelerating
the innovation of its product creation as a vital

factor in maintaining its vitality and continued
ability to flourish and grow.

Integrating distribution with engineering,
manufacturing and customer service axis

To add even more value to its manufacturing opera­tions, Sony is extending the level of its process
integration over and above the engineering,
manufacturing and customer service axis. Logis­tics have been seamlessly integrated, and an even
more advanced supply chain management (SCM)
system is being assembled. Close links between
manufacturing and distribution mean products
can reach customers even faster. Also, by execut­ing logistics reforms in tandem with manufactur­ing innovation, Sony is cutting the procurement
costs of product components as well as reducing
the inventories of these components and the
finished products themselves. As a result, overall
space utilization at manufacturing and distribu­tion sites can be enhanced.

Sony believes constant manufacturing and
distribution innovation—even on a daily basis—
will yield continuous improvements, essential to
the Sony Group‘s success.

Strengthening the development, engineering
and manufacturing processes of key components
will accelerate product differentiation

Semiconductors and other new components are
vital to success in the emerging market for digital
consumer electronics. With this in mind, operation
sites in Japan are positioned as hubs to strengthen
the domestic production sites’ ability to produce
advanced modules and components. By stepping
up the output of original and unique components,
Sony is differentiating its products and creating
added value in the manufacturing stage.

28