Market Insight

Sony tries again to convert tech leadership into improved sales with Xperia XZ2 smartphone's 4K HDR video recording

February 25, 2018


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At MWC Sony Mobile unveiled two new smartphones and a new wearable, notable features include:

- Xperia XZ2: 5.7” display, Sony’s first 18:9 screen; 4K HDR video recording, the first HDR video capture at that quality in a phone; dynamic vibration system to automatically accompany audio in video or games; a custom image signal processor (ISP) co-developed with Qualcomm; Snapdragon 845; new Gorilla Glass 5 front & rear curved industrial design; wireless charging; IP65/68; LTE Cat 18 1.2Gbps peak download; available March.

- Xperia XZ2 Compact: 5” 1080P display compact smartphone; polycarbonate rear design; 4x4 MIMO, 800Gbps peak download; camera, chipset, and other features the same as XZ2.

- Xperia Ear Duo: open audio design earbuds, compatible with Android and iOS; previously shown as a prototype but now launching commercially.

 

Our analysis

Sony has proven a genuine leader in new mobile technologies in recent years although it has failed to convert technology leadership positions into market leadership. Although risky, to grow the business Sony must match investments in technical innovation with marketing spend to re-vitalize the Sony brand both in the operator channel and among consumers. Otherwise, Sony will remain a niche smartphone brand.

To date, a research and development led strategy has not raised Sony Mobile’s market position significantly. In 2017, Sony’s market share was 1% which was little changed from 1.1% a year before. Sony will hope the new industrial design of these models will turn this around and grow shipments from 2017’s modest 13.7m, but the challenge is that while very different to older Sony smartphones, XZ2 has strong design similarities in its use of curved all glass designs to 2017 models from HTC such as U11 which did poorly in the market. Sony has improved its design but not enough to stand out in the market.

Sony’s market importance is greater than its volumes suggest

The importance of Sony’s current innovations with these new smartphones will set the tone for the smartphone market for the next few years. IHS Markit expects other smartphone OEMs to deliver similar capabilities in the future including copying Sony’s 4K HDR video capture.

A year before Samsung announced super slow motion on Galaxy S9, Sony offered super slow motion video capture at 960 frames per second on the Xperia XZ Premium. In the past, Sony has also offered on-smartphone audio noise cancellation, high quality audio formats, and the smartphone industry’s first 4K display all ahead of the market. But Sony has failed to market these features to consumers and use these differentiated features re-grow its business.

Unique ISP hardware enables first HDR video capture on a smartphone

Sony is correctly focusing on camera and audio technology innovations in this new range. This uses expertise and brand awareness of other parts of Sony group. Sony must tackle perceptions that a dual camera design is now essential in a smartphone in its marketing. Google’s Pixel 2 publicity will help Sony make the case that a single camera is capable of beating dual camera designs.

The most notable aspect of the new models is the partnership with Qualcomm to design a custom Image Signal Processor (ISP) to support Sony’s camera innovation. IHS Markit understands this is a proprietary design for Sony, and the intent is not for Sony or Qualcomm to later make it available to other OEMs. But this is a business decision which could change if a large enough commercial opportunity arises.

For Qualcomm, Sony’s camera market position both in the dedicated camera market, and as a supplier of camera sensors to other smartphone OEMs, makes Sony a good strategic fit for collaboration on ISP and other imaging technologies. Qualcomm also wishes smaller OEMs like Sony to be successful because unlike the big three - Apple, Samsung and Huawei - these smaller handset makers lack in-house chipset designs and need to use Qualcomm for flagship products.

The custom hardware enables Sony to offer impressive HDR video capture that enables consumers to capture rich colors and more detail in challenging lighting conditions. HDR video helps Sony to show off the new wide color displays that have been arriving in the smartphone market since the start of 2017.

Small high-end smartphones are differentiated because they are so rare

XZ2 Compact is a rare premium compact smartphone which IHS Markit expects will do well in select countries with a preference for smaller smartphones such as Japan and parts of Europe.

It’s noticeable Sony is holding back the use of the word “Premium” from these new smartphone models, which indicates there is likely an even higher end smartphone due to be released by Sony later this year. IHS Markit expects this model will finally feature a dual camera design, paired with a higher resolution 4K display, as well as all of the other improvements included in these two new models.

These are solid product releases from Sony Mobile, but there is much more work needed to re-build Sony’s smartphone business and achievable sustainable profitability.

Sony rightly continues to emphasize how strategic making smartphones is to the group, because smartphones are the focus of consumers’ digital lives and the technologies developed first on smartphones have enormous adjacent market potential. However, with new leadership in place, long term Sony will be more likely to remain a smartphone maker if it can convert innovation into both larger unit volumes as well as profitability.

Organization
Sony
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