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Sony (SONY) Q2 2021 Earnings Call Transcript

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SNE earnings call for the period ending September 30, 2021.

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Sony (SONY 1.66%)
Q2 2021 Earnings Call
Oct 28, 2021, 1:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Unknown speaker

Ladies and gentlemen, we will now begin FY '21 Q2 earnings announcement of Sony Group Corporation. I am Okada from corporate communications. I'll be serving as master of ceremonies today. This session is for media analysts and institutional investors to whom we have sent out an invitation in advance.

This session is webcast live on our investor relations website. First, Mr. Hiroki Totoki, executive deputy president and chief financial officer, will explain the consolidated results for FY '21 Q2 and consolidated results forecast for FY '21, followed by Q&A. Duration is 70 minutes.

Mr. Totoki, the floor is yours.

Hiroki Totoki -- Executive Deputy President and Chief Financial Officer

Today, I will discuss the following topics. The consolidated results for second quarter ended September 30, '21 increased 13% compared to the same quarter of the previous fiscal year to JPY 2.3694 trillion and consolidated operating income increased JPY 3.2 billion year on year to JPY 318.5 billion, both record highs for the second quarter. Income before income taxes decreased JPY 20.6 billion year on year to JPY 283.1 billion, primarily due to a deterioration of valuation gains and losses on securities investment. Net income attributable to Sony Group Corporation's shareholder was JPY 213.1 billion, a decrease of JPY 245.5 billion compared to the same quarter of the previous fiscal year, which included the recording of JPY 214.3 billion reversal of valuation allowances recorded against the deferred tax assets.

Please see Pages 3 to 6 of the presentation material for a description of each profit metrics. This slide shows the results by segment for FY '21 Q2. Next, I will show the consolidated results forecast for FY '21. Consolidated sales are expected to increase JPY 200 billion compared to our previous forecast to JPY 9.9 trillion and operating income is expected to increase JPY 60 billion to JPY 1.040 trillion.

We have also upwardly revised our forecast for income before income taxes to JPY 990 billion and our forecast for net income attributable to Sony Group Corporation's shareholders to JPY 730 billion. Forecast for consolidated operating cash flow excluding the Financial Services segment is unchanged at JPY 890 billion. This slide shows our forecast by segment for FY '21. I will now explain the situation in each of our business segments.

First is the Game & Network Services segment. FY '21 Q2 sales increased a significant 27% year on year to JPY 645.4 billion, primarily due to an increase in PlayStation 5 hardware sales and an increase in game software sales of third-party titles. Operating income decreased JPY 22.7 billion year on year to JPY 82.7 billion, primarily due to a deterioration in the profitability of hardware and peripheral devices. FY '21 forecast remains unchanged from the previous forecast.

Driven by an increase in add-on content sales, Q2 game software sales exceeded those in the same quarter of the previous fiscal year when stay-at-home demand was strong. Total game play time of PlayStation users decreased 17% year on year. But the fact that add-on content sales exceeded those in the same quarter of the previous fiscal year is a positive sign that the quality of user engagement has increased. In the second half of this fiscal year, the first-party software titles, Horizon Forbidden West and Gran Turismo 7 as well as major third-party software titles are scheduled to be released.

As more game fans play these exciting titles, we expect user engagement to increase even more. At this time, there is no change to our FY '21 unit sales target for PS5 hardware, but several factors are significantly impacting the supply of the product such as the disruption of the global distribution, supply chain, and limitations on the supply of components, especially semiconductors. We are continuing to exert every effort to maintain the momentum of the PlayStation platform by meeting the expectations of the people who are waiting for PS5. To further strengthen our software development capability, we announced the acquisition of Firesprite in September and Bluepoint Games this month.

Both companies have excellent technical capabilities and superb track records, and they have heretofore contributed to the development of many of our gaming software titles. Going forward, we plan to leverage these studios to increase the development capability of the PlayStation Studio and diffuse the expertise necessary to deploy games to PCs and mobile devices. As a result of the acquisition announced since the beginning of this fiscal year, the number of PlayStation studios will increase by four to 16 and the number of developers will increase by almost 20%. We plan to continue to aggressively invest in our development capability going forward.

Next is the Music segment. FY '21 Q2 sales increased a significant 18% year on year to JPY 271.6 billion, primarily due to an increase in streaming revenue. Despite the impact of the increase in sales, operating income decreased to JPY 50.6 billion, JPY 3.7 billion lower than the same quarter of the previous fiscal year, in which a JPY 5.9 billion onetime gain was recorded for the transfer of business outside of Japan. The combination to the operating income of the quarter from Visual Media and Platform, which includes mobile game application and anime, accounted for approximately one quarter of the operating income of the segment.

FY '21 sales are expected to increase JPY 30 billion compared to our previous forecast to JPY 1.070 trillion and FY '21 operating income is expected to increase JPY 10 billion to JPY 200 billion. Streaming revenue in Q2 continued to grow at a high rate, 58% -- 38% year on year in Recorded Music and 47% year on year in Music Publishing. Sony Music Group, which is responsible for our music business outside of Japan, where the growth of the streaming market is conspicuous, is expected to reach record high operating income this fiscal year for the fifth consecutive year. We continue to generate hits, thanks to our enhanced efforts to discover and nurture artists.

In Q2, the Recorded Music business had an average of 38 songs in Spotify's Global Top 100 Songs ranking. Moreover, the new song, Easy On Me, which was released by world renowned singer-songwriter, Adele, after a six-year absence, on October 14 made history as the most played on Spotify in a single day. And we have high expectations for album 30, which will be released next month. And Sony's competitive advantages in the music business lie in our global ecosystem that can meet the diverse needs of artists.And the fact that because our music business is part of the Sony Group, we can offer artists opportunities to express their creativity in areas such as games and pictures.

In addition, we are enhancing our many artist-friendly initiatives such as offering them financial and other support. And we believe these initiatives anticipate the strong financial performance of this segment. Next is the Pictures segment. FY '21 Q2 sales increased a significant 40% year on year to JPY 260.7 billion, primarily due to an increase in sales of Television Productions and Media Networks.

Despite the impact of the increase in sales, operating income decreased JPY 1.2 billion year on year to JPY 31.6 billion primarily due to an increase in marketing expenses related to the release of films in theaters. FY '21 sales are expected to increase JPY 60 billion compared to our previous forecast to JPY 1.180 trillion and operating income is expected to increase JPY 18 billion compared to our previous forecast to JPY 108 billion. Primarily in the U.S., we have begun to gradually release major films in theaters, and our film, Venom: Let There be Carnage, which was released this month, generated box office revenue approximately JPY 10 billion in the first three days of its release in the U.S., which is the best opening performance of any film during the pandemic. We are planning to release our compelling IP from Sony to theaters going forward such as Ghost Busters: Afterlife and Spider-Man: No Way Home.

On the other hand, we plan to monetize family oriented films this fiscal year such as Hotel Transylvania: Transformania by directly licensing them to video streaming services as we do not believe they will draw us sufficient theatrical audiences during the pandemic. Going forward, we plan to continue to respond appropriately to the changes in the environment through a flexible releasing strategy aimed at maximizing the long-term value of our films. Last month, we signed a nonbinding term sheet to merge subsidiary of Sony Pictures Entertainment, SPE, and Zee Entertainment Enterprises, a media company in India. Under the proposed merger, SPE will hold a majority stake in the resulting merged company.

Under the term sheet, the two parties are conducting mutual due diligence. And Zee has agreed to negotiate exclusively with SPE for a period of 90 days, with a goal of reaching definitive agreements. India has an economic base, which is rapidly growing, primarily among the younger generation and is the largest linear TV market in the world that is still growing. In addition, the opportunity for digital distribution services is beginning to grow rapidly due to improvements in India's communications infrastructure.

SPE's Indian business, which includes the video distribution service, SonyLIV, is a leading TV broadcasting business in India. And it accounts for slightly less than 40% of the sales of Media Networks in Q2. As the growth area in the Pictures segment, we plan to continue to proactively seek opportunities to expand this business by using the profitability of the TV broadcasting business and our content assets to strengthen our digital distribution service. Now I will explain our anime business that spans the Music and Pictures segment.

On August 9 of this year, we completed the acquisition of Crunchyroll by Funimation, a joint venture between SPE and Aniplex. Crunchyroll is the world's largest anime-dedicated direct-to-consumer service with more than 120 million registered users and more than five million paying subscribers in more than 200 countries and territories. The market for Japanese anime outside of Japan has grown significantly at a compound annual growth rate of 30% since 2014. We aim to create the most beloved video distribution platform for anime fans around the world by delivering compelling content through enhanced distribution service brought about by the integration of Funimation and Crunchyroll.

And next is the Electronics Products & Solutions segment. Primarily due to the impact of foreign exchange rates and an increase in the sales of smartphones, Q2 sales increased 9% year on year to JPY 581.9 billion. Operating income increased a significant JPY 19.3 billion year on year to JPY 72.7 billion primarily due to the benefit of the increase in sales and improvement in the product mix. FY '21 sales are expected to decrease JPY 40 billion compared to our previous forecast to JPY 2.280 trillion, while operating income is expected to increase JPY 20 billion compared to the previous forecast to JPY 190 billion to reflect the results of FY '21 Q2.

During Q2, we were unable to meet the demand for some products because the resurgence of the COVID-19 pandemic in Southeast Asia led to limitations on our factory operations and on the supply of content. However, we maintained a high level of profitability due to our ability to maintain prices and shift to higher value-added models. In the TV business, although we were able to maintain market prices during Q2, a rapid decrease in panel prices going forward could impact the market prices of our products. So we have incorporated that possibility in our forecast, and we'll closely monitor market trends in order to control inventory and margin.

In addition, limitations on the supply of components, especially semiconductors, have recently become apparent. And we have incorporated the impact of these shortages in our forecast for the fiscal year. Prior to incorporating these risks, the forecasted operating income for the second half of the fiscal year was essentially flat compared to the second half of the previous fiscal year. Next is the Imaging & Sensing Solutions segment.

FY '21 Q2 sales decreased 9% year on year to JPY 278.3 billion, and operating income decreased JPY 1.0 billion year on year to JPY 49.7 billion. Our FY '21 sales forecast remains unchanged from the previous forecast. But operating income is expected to increase JPY 10 billion compared to our previous forecast to JPY 150 billion. Although the mobile sensor business was impacted by the recent weakness in the Chinese smartphone market, a tight supply and demand situation for semiconductors in general and delays in the production of smartphone and components for smartphones in the southeast, there is no major change to our FY '21 forecast for the business, primarily due to the positive impact of foreign exchange rates and the reduction in expenses.

We are taking steps to minimize the impact on our financial performance this fiscal year of restriction on the quality and increase in the price of logic wafers procured from foundries. The efforts we have made to expand our customer base are also progressing steadily. However, securing the logic wafers necessary to increase the quantity and the enhanced added value of our sensors from the next fiscal year has become a major issue. We are continuing to negotiate with our foundries, but the tight supply and demand situation is expected to continue next fiscal year.

Despite these challenges, we upwardly revise our fiscal year forecast for image sensors sold to audio visual and industrial equipment. The market for these sensors is growing faster than anticipated primarily due to recovery in the market for digital cameras and increasing demand for factory automation. This market is more stable than the market for mobile application and has helped our profitability. So we expect that it will contribute to the stabilization of profit of the entire image sensor business going forward.

Now I'd like to discuss the potential construction of a semiconductor factory in Japan by Taiwan Semiconductor Manufacturing Company, which was announced by TSMC the other day. Sony outsources almost all the production of logic wafers as part of the process of our manufacturing image sensors. So securing a stable supply of logic wafers is a critical business issue at the time when the global semiconductor shortage is expected to be prolonged. Because building a factory of this nature could serve as a possible solution to this problem, in close collaboration with TSMC and the Ministry of Economy, Trade and Industry of Japan, we are studying the possibility of adding TSMC's Japan factory to our sources of logic wafer by leveraging our expertise, managing our own semiconductor factories in Japan to assist TSMC in building the new factory.

We believe that further strengthening and deepening our partnership with TSMC, which has a world-leading semiconductor production technology, is extremely meaningful for Sony. However, this matter is subject to further study and discussion. Last is the Financial Services segment. FY '21 Q2 Financial Services revenue was JPY 368.4 billion, essentially flat year on year.

And operating income increased JPY 6 billion to JPY 43.1 billion, primarily due to an increase in profit at Sony Life Insurance Company Ltd. New policy amount in force at Sony Life during Q2 exceeded that in the same quarter of the previous fiscal year, primarily due to the strength of our business selling to corporation. FY '21 Financial Services revenue is expected to increase JPY 90 billion compared to our previous forecast to JPY 1.490 trillion. Our forecast for operating income remains unchanged from the previous forecast.

Lastly, I will discuss the strategic investments we are accelerating in order to grow over the medium to long term. Approximately JPY 1 trillion of -- approximately JPY 1.4 trillion in strategic investment we made from April 1, 2018, to March 31, 2021, was used to acquire businesses while the rest was used to obtain minority equity stakes and repurchase Sony's stock. We expect to generate operating cash flow of approximately JPY 180 billion from the acquired businesses over the three years from April 1, 2021 to March 31, 2024. As a part of our resources for capital allocation, we intend to use this cash flow from further investment accelerating the cycle, thereby returns generated from previous investments are used to invest in future growth.

Our ability to invest early in areas with high growth potential has increased. And opportunities to invest have also steadily increased, especially in the entertainment space. During the period of current midrange plan, we plan to make strategic investment more than JPY 2 trillion, including Sony's stock repurchases. The total amount paid so far for companies and assets that have already been acquired, including Crunchyroll, is approximately JPY 280 billion.

The total amount of investment already decided upon is approximately JPY 120 billion. Last week, we announced the sale of GSN Games, a casual mobile game business under PSC. We plan to reallocate the capital generated from the sale of businesses and assets like this to strategic investment in growth area. This concludes my remarks.

Unknown speaker

Thank you very much. It was Totoki, executive vice president and CFO. From now -- from five minutes to four, we'll have a QA by journalists, and from 4:20, Q&A for investors and analysts. We are scheduled to have 20 minutes each for Q&A.

Those media, investors, analysts who have registered in advance, please connect to the number designated in advance. Also, those of you who have not registered in advance, you can continue to see the Q&A session on the webcast. Would you kindly wait until the Q&A session begins. We'll start Q&A from media shortly, which you can wait for a few minutes.

Thank you very much for waiting. Now we are going to entertain questions from the media. We have with us Hiroki Totoki, executive deputy president and CFO; Naomi Matsuoka, senior vice president, in charge of corporate planning, control, finance, and IR. [Operator instructions] Now we'd like to start Q&A session.

[Operator instructions]

The first is Inamoto-san from NHK.

Hiroyuki Inamoto -- NHK, Japan Broadcasting Corporation -- Senior Producer

Thank you very much. I'm Inamoto from NHK. Can you hear me?

Hiroki Totoki -- Executive Deputy President and Chief Financial Officer

Yes, we can.

Hiroyuki Inamoto -- NHK, Japan Broadcasting Corporation -- Senior Producer

I have two questions. First question has to do with the impact of COVID-19. The state of emergency was lifted and economic activities are recovering gradually. The impact -- how do you factor in the impacts this time? And also, are there going to be changes in the stay-home demand? And what would be the possible impacts upon your business? That's my first question.

Second question. The semiconductor production, TMSC of Taiwan -- TSMC is going to establish a plant in Japan, and you are a candidate for working together with TSMC. To the extent that you can share with you, can you explain how you're going to collaborate with them?

Hiroki Totoki -- Executive Deputy President and Chief Financial Officer

Thank you for your questions. Two questions, I am going to respond to both of your questions. First, impact of COVID-19; and secondly, TSMC construction of the plant of TSMC and our position as to that. With regard to your first question, COVID-19.

In the second quarter, the impact of the production and logistics is large, and we have difficulty and challenge in managing, but frontline people have worked well, and it was managed well as a business. Going forward, pandemic might spread in the future and it may subside. So we have to -- we should be accumulating the know-how to respond to such pandemics and respond accordingly. Last year, in game business, impact -- effect of the stay-home demand was large.

And this was a tailwind for our business. This year, this tailwind is less -- we have less impact from stay-home demand. Your second question, TSMC's new factory. As I mentioned earlier, for us, image sensor logic wafer and a stable procurement of that is a very important thing for us.

And the stable supply of semiconductor is the key for the Japanese industry as a whole. Therefore, to be -- as much as possible, we'd like to collaborate on this front. As for the details, it is a matter -- there are many things which are still under discussion. And of course, when decisions are made, promptly, we are going to explain to you.

Thank you.

Unknown speaker

The next question, Asahi Shimbun Newspaper, Sasaki-san, please.

Asahi Shimbun Newspaper, Sasaki. Thank you for the presentation. Can you hear me?

Hiroki Totoki -- Executive Deputy President and Chief Financial Officer

Yes, please.

Unknown speaker

Thank you. I have two questions. First, imaging and the imaging issue. As you explained, TSMC and Sony will be collaborating, I understand.

But more specifically, are you going to hold a stake in the company? Can I ask -- answer that? And also, you said that it will contribute to the Japanese industry on the whole. But automotive sectors -- excuse me? So I believe that automotive sectors will also be involved in about gaming. The PS5 production is not picking up. The second quarter again is 3.3 million units, so it's slow.

And I'm wondering if you can reach 14 million that you are targeting toward. So is there a possibility that you'll be reducing your target? Can you elaborate on that? So these are my two questions. 

Hiroki Totoki -- Executive Deputy President and Chief Financial Officer

Thank you for your questions. I will respond to both questions. Well, first, about the TSMC and the factory of TSMC, whether we will hold a stake in the new factory. Well, we are targeting toward securing stable supply.

And that is the reason why we are going to support them in building and operating this new factory. And so when it comes to investment and the amount in investment, those details, this is currently under study and being discussed. And therefore, once something is decided, we would like to promptly inform you. And about PlayStation 5.

Well, this fiscal year's target -- well, this fiscal year. In the second year of PS4, it was, to be more precise, 14.8 million units. And we were targeting to exceed this number, and we have not changed this target. Meanwhile, well, worldwide, there is a disruption in the logistics and mainly semiconductors device supply are being constrained.

And this is having a larger impact. And as you know, the hardware sales due in the first quarter was less unit-wise. And so this is having an impact on us and likewise, for the second quarter. But I think that with our effort in putting in place different measures, the PS platform momentum can be maintained.

And especially to the users that are waiting for the PS5, we want to be able to supply as many PF5s as possible to our customers who are waiting. That is our thinking. Thank you.

Unknown speaker

The next question, from Nikkei, Mr. Bam, please.

This is Bam from Nikkei. Can you hear me?

Hiroki Totoki -- Executive Deputy President and Chief Financial Officer

Yes.

Unknown speaker

And the answer to Asahi Shimbun question, you have a comprehensive negotiation and consultation. And can we understand that includes equity investment? TSMC, in their press conference for the joint venture, normally, they didn't engage in that. But this time, case-by-case, they study this possibility. So equity investment or the part of the factory is on and some funding is provided.

Do you have that kind of equity investment?

Hiroki Totoki -- Executive Deputy President and Chief Financial Officer

Thank you very much for your question about this particular issue. Let me be redundant. Let me repeat myself. Currently, the discussion is underway and consultation is underway.

And therefore, I'm not able to make comments further. And once decisions are made, I would like to share with -- that decision immediately with you.

Unknown speaker

[Operator instructions] Mr. Masuda-san from Nikkei Shimbun, please.

Masuda from Nikkei. Can you hear me?

Hiroki Totoki -- Executive Deputy President and Chief Financial Officer

Yes, we can.

Unknown speaker

Thank you. I have two questions. Earlier, semiconductor, their plant was stopped due to COVID-19, and you had difficulty in managing the situation. In order to conduct a stable procurement, how are you managing this? Can you elaborate me that? And also the impact of the shortage of semiconductor is seen in games and electronics.

And how much monetary impact is there? Can you explain? Second question, capital allocation. In the -- you have been conducting acquisitions. And cumulatively, JPY 180 billion operating cash flow is forecasted. More specifically, in what area are you going to do this? Are you going to do investment or return to the shareholders?

Hiroki Totoki -- Executive Deputy President and Chief Financial Officer

Thank you for your questions. I would like to respond to both of the questions. First, semiconductor -- shortage of semiconductor and other issues of the supply chain. In order to stably procure, what can we do? In various ways, we have been addressing this question.

Making commercialization of parts and components and also we ask the affiliated companies to produce for us. And where there's a forecast of a shortage, we will be increasing the level of inventory higher than usual and also change the design so that other parts and components can be used. So various measures can be taken with a combination of these measures. So far, at least up until the first half of this fiscal year, we have been able to minimize the negative impact.

And as to the monetary amount, how much impact is there, I think it's difficult to tell how much. But rather, I think that we are managing the situation rather well. In the second half, this situation is likely to continue. So as I touched upon in my presentation, we have factored in the risk in the EP&S segment.

With regards to your second question, capital allocation going forward. Basically, from this fiscal year, for three years, in the mid-range plan, more than JPY 2 trillion is to be allocated for strategic investment. As we have stated, strategic investment for the growth of the business in the future, we will be making strategic investments. That is our top most priority, followed by capex and return to the shareholders, share buyback, repurchase of our shares, that is the order.

Questions & Answers:

Operator

Next question, Nishida-san, freelancer, please.

Unknown speaker

Can you hear me?

Hiroki Totoki -- Executive Deputy President and Chief Financial Officer

Yes.

Unknown speaker

I have two questions. First, imaging sensor -- about the imaging sensor. I think there is some instability for those for smartphones and -- but what about the product mix changes? Can you explain about the changes in product mix? Are you going to shrink the smartphone portion? Or are you going to add on more for the industrial applications? So can you give me a total view about it? PlayStation 5, the second question. Well, the production is not picking up.

And therefore, I would like to know what is happening about the momentum. And I do understand that there is a problem about unit sales and consumer momentum. Are you not facing any adverse situation? Or do you need to come up with measures in the mid- to long term? Can you talk about your future plans?

Hiroki Totoki -- Executive Deputy President and Chief Financial Officer

Again, I will try to respond to both of those questions. Well, about the image sensor -- imaging sensor, those for smartphones and the other is for industrial equipment cameras and for those applications. So it's a mix of those semiconductors are imaging sensors. We are planning to add on.

But about the size, scale, and the smartphone market is much bigger. And therefore, I think we have to observe the trend in the smartphone market. We have to carefully monitor what is happening in the smartphone market. That's the first part.

And about PS5, we -- as early as possible, we'd like to release as many units. This is what we have in mind. But so far, overall, in MAU, it's about 100 million people. PS5, ratio-wise, it's less than 20%.

And so when it comes to user engagement, PS5 sales does not immediately have impact on users' engagement. So it's hard to believe that there will be a direct impact now. The add-on content, it is more than last -- the second quarter year on year because we think that the user engagement has improved. We want to try to positively take advantage of this momentum in PS5.

And also, we have another release in the fourth quarter, and therefore, we would like to carefully monitor the trend. Thank you.

Unknown speaker

Time is getting short. And therefore, the next question will be the last question. From Nikkan Kogyo Shimbun, Yaskawa-san, please.

Can you hear me?

Hiroki Totoki -- Executive Deputy President and Chief Financial Officer

Yes, we can. Please.

Unknown speaker

Yaskawa from Nikkan Kogyo Shimbun. I have two questions. Regarding the yen depreciation and how much the business incorporates the impacts of the cheap yen. And the government -- regarding the quarterly disclosure, the government will begin the discussion about that.

And how -- what is your view about this new initiative by the government?

Hiroki Totoki -- Executive Deputy President and Chief Financial Officer

Thank you very much for your question. The first question is about the impact of the yen depreciation on the business results. And the second is regarding the review and the revision of the quarterly disclosure, what is our view on it. And regarding the first question, I would like to answer your question.

And the second question will be answered by Matsuoka-san. So regarding the cheap yen, the currency, this time, compared to the previous forecast, the forecast this time is -- the currency assumption is the euro is -- one yen higher for the yen, JPY 131 to JPY 130. And so there is a change assumption. And for dollar, the exchange rate is -- stays at the same level, JPY 110.

And so this impact has not changed significantly as this indicates. And this has been already disclosed, and one yen higher means -- and what is the impact on the consolidated results. And for the Game Network Service and EP&S and I&SS businesses, one yen higher means that in terms of dollar, it's positive. And in terms of euro, JPY 5.5 billion negative impact is recorded.

And that is a simulation that we include for our forecast. And for Music and Pictures combined, one yen higher means that in terms of dollar, the JPY 2 billion negative impact. And that is the impact on the operating profit, operating income. And so that is the sensitivity that we use for forecast.

Excuse me, dollar is JPY 111, that is our assumption. So one yen lower. So that is JPY 111 versus -- against the dollar.

Naomi Matsuoka -- Senior Vice President, Corporate Planning, Control, Finance, and Investor Relations

The second question. So I will answer the question. I believe that there are many different opinions on this. But on our part, for the policy, the discussion is still underway.

And at this moment, I would like to refrain from making any comments. That's the comment from myself.

Unknown speaker

Since time is up, we would like to now bring to an end the question from the media members in order to change the questioners. And our question and answer from the analysts will begin at 04:21.

Sadahiko Hayakawa -- Vice President

Thank you very much for waiting, ladies and gentlemen. Now we are going to entertain questions from the investors and analysts. [Inaudible] as emcee, Hayakawa from finance and IR. The respondents are Hiroki Totoki, executive deputy president and chief financial officer; Naomi Matsuoka, senior vice president, in charge of corporate planning and control, finance and IR; and Hirotoshi Korenaga, senior vice president, in charge of accounting.

[Operator instructions] The first question, J. P. Morgan, Ayada-san, please.

Junya Ayada -- J.P. Morgan -- Analyst

Ayada from J. P. Morgan. Game and semiconductor, I have one question each.

First is about games, user engagement. In the supplementary material, Page 9, monthly active user and member of PlayStation Plus and how you analyze the numbers. Monthly active users have been decreasing over the past quarters, but it has stopped the decline. And PS Plus members on a quarter-on-quarter basis is increasing.

Third quarter, toward the Christmas period, quarter -- are you expecting that there will be a stop in the decline of MAU and PS Plus? At this timing, we are not expecting that the number will increase. PS Plus collection contributed to increasing the number of members. If you have any ideas, please let us know. My second question, image sensor.

As usual, capacity and the record of wafer input and actual results. Also in relation to that, Totoki-san earlier talked about the procurement of logic in the future. And this is -- might become a point of concern in the future. But putting that aside for the time being, from mobile customers -- encouraged from the mobile customers, especially in this area, toward next year, the mix will increase with the size becoming larger.

So is there any change? As you talk with the customers, what are the focus of the discussion with the customers? Can you share with us your ideas?

Hiroki Totoki -- Executive Deputy President and Chief Financial Officer

Thank you very much for your questions. Both questions, I am going to respond to both of the questions that you have asked. First point, MAU, monthly active users, and the PS Plus members, the trend of the membership. How do I look at this was the question.

PS Plus. At the end of June, there was a decrease in the number of members, but it was a temporary phenomenon as we analyze. It is not -- what trigger the temporary decline is difficult to pinpoint, but at any rate, it has already hit the bottom. Second quarter, especially including promotion activities, it was increased, taking measures to increase the membership.

So promotion becoming effective is not wrong at all. And the recent trend is such that whether or not there is a stay-home demand, it fluctuates and difficult to analyze. So after the second quarter has ended and the factor of the stay-home demand has already disappeared as we move to the year-end holiday seasons, we look at the current situation as positive and we'd like to come up with strong momentum. And then I&SS capacity.

The numbers, FY '21 second quarter end, in total, 140,000 per month. And the third quarter end, 137,000 per month. It is expected. And this is due to the change in model mix.

And the number of wafers input in the second quarter result, 3-month average is about 139,000. As of first quarter, forecast was 138,000. So it is practically about the same level as forecasted at full capacity. In the third quarter, the number of wafers, simple average of three months, is 138,000.

We are expecting full utilization. And the trend of larger size as they are changed smoothly, the discussion with the customers, not only next year, but we are talking with looking into the longer future. And as we have expected and forecast, the trend of larger size is likely to continue. Specific customer in China is going to drive larger size.

And the vacuum created by their disappearance is not completely filled. So the pace might slow down slightly as compared to what I have explained last year.

Sadahiko Hayakawa -- Vice President

Next question. SMBC Nikko, Katsura-san, please?

Ryosuke Katsura -- SMBC Nikko Securities-- Analyst

The supply chain issue including the pandemic impact and Page 22, cash allocation, on your slide. That included, I would like to ask two questions. First, about the impact of COVID-19. Well, to the extent in your presentation, you said that second half of the year compared to last year, do you think that there will be a risk of JPY 38 billion to JPY 40 billion? But other than that, the game or I&SS, the impact in those categories as well, overall, the pandemic impact, how do you see it? So if you could elaborate on the overall impact on different segments.

And the second, Page 22 is capital allocation. And in the three years, it was 5.3 and capex of more than JPY 2 trillion. And at TSMC talks, once this comes up, which -- and once it's made public, which will be included in? It's just a hypothetical question, but -- and the reason why I ask this is as an investment size, it's huge, and we hear and we're wondering if there is an add-on effect. I just want to understand the thinking behind this.

And other than that, the strategic investment, you said about JPY 120 billion has already been decided. And I believe that India's Zee is included here or if it's not, please say so. So more than JPY 2 trillion. I think in terms of the implementation size, it's still limited.

So can you elaborate?

Hiroki Totoki -- Executive Deputy President and Chief Financial Officer

Thank you for your questions. Well, first, your first question about the supply chain risk. So as you have rightly said, for EP&S, it is included. And the amount is close to what you were saying.

So this is factored in, estimated. But if there are other segments, well, I cannot say anything for sure. But I think those game network segment, which is also producing hardware, will be impacted. But unlike EP&S, I believe that the supply delay and impact on profit and loss will be totally different.

And in case of PS5, just because shipment is late, it will not aggravate -- this fiscal year's performance is not as direct an impact. So I think for this fiscal year, the risk is maybe factored in the EP&S. And that is the current thinking behind what we have put together here for this fiscal year in the forecast. And now about capital allocation, the TSMC.

If I talk about TSMC, I will have to go into the detailed specifics. And it's very difficult for me to explain, trying to avoid that. But in general terms, if we are going to hold a stake, it will be a strategic investment. If it's capex, it will be included under capex.

Please understand that to be the case. But this is still under discussion, and there is nothing decided. Please understand that is the current situation. And about the content, about Zee, Matsuoka-san can explain that part.

Naomi Matsuoka -- Senior Vice President, Corporate Planning, Control, Finance, and Investor Relations

You talked about whether Zee is included in the strategic investment, which has already been decided. No, it is not included. And we have to follow up on what happens from here and after. Well, the ones that are included on those already decided, those are the ones where we have already made an official approval and made a decision.

So that is included in the ones that have been already decided. But in order to get to that stage, Zee, as I explained, we are still doing due diligence and nothing is finalized and decided yet. 

Sadahiko Hayakawa -- Vice President

Now we would like to move on to the next question. Nakane-san from Mizuho Securities.

Yasuo Nakane -- Mizuho Securities -- Analyst

My name is Nakane from Mizuho Securities. Can you hear me?

Hiroki Totoki -- Executive Deputy President and Chief Financial Officer

Yes.

Yasuo Nakane -- Mizuho Securities -- Analyst

Thank you. I had two questions. They are not related to the consolidated results this time. The first question is Mr.

Yoshida mentioned in MLP connected to one billion people. And for games, there are other figures disclosed, but Crunchyroll and Zee may be included and many other new connections will be emerging. So to the extent possible, the Crunchyroll 120 million, and that is what you mentioned. At the end of September, if there is anything that you can disclose, please share that with us.

And if possible, at the end of the term, the fiscal year, what is your prospect? And how -- what way are you going to disclose those figures? And the second question is related to the project in India. And at this moment, under the current mid-range plan on a group basis, how clear the strategy about India is within the group? And according to my understanding so far, in each business segment has its own strategy. And currently, the synergy is emphasized. But still, it looks like each business has its own.

And in India, Media Network and other pictures and films, pictures and music, I think the situation is getting better. And for instance, the collaboration between the different segments like in America, and therefore, the regional strategy, if you have any strategy groupwide, please let us know.

Hiroki Totoki -- Executive Deputy President and Chief Financial Officer

So your questions -- there are -- the questions from you, and I will answer two questions. And Matsuoka-san will supplement my answer. And the connection with one billion people, our challenge for that target. And that is our long-term vision.

And also, that is defined as our aspiration. That's the way I interpret. And so every quarter or every fiscal year, it's not like something that we show like subscription. And so connecting with one billion people, in order to fulfill that vision, we do need to make investments strategically, and that has been executed and other measures are incorporated, and group synergy is also fully maximized.

Personally, I believe that throughout a year, we engage in different kinds of activities, and there are updates about the activities. And following that cycle, I think we are able to share that information with you. And as for the policy of disclosure, we do not have any, the finalized one yet. So what we do and announced it, whether we are able to connect with one million people, I hope that you observe the trend and progress and give us your feedback.

And second question, that is the groupwide strategy vis-a-vis India. In answering that question, there is SonyLIV. And within the group in India, this business unit is a very important driver to promote the growth. And so that is the reason we engage in the deal in India.

So information obtained through this project and the opportunities for other business areas. And among the top executives within the group, the discussion is constantly held. So through those dialogue, group synergy will be manifested and realized, in my view. And not just limiting this as a slogan, we'd like to translate that into actions.

Matsuoka-san, do you have any point to supplement?

Naomi Matsuoka -- Senior Vice President, Corporate Planning, Control, Finance, and Investor Relations

India, as you know, is a big area with the potential for great growth. And SonyLIV has been increasing subscriber size at the end of September, the 470 million is the number. And therefore, going forward, in India, as Totoki-san mentioned now, the video and music, the pictures and music, we would like to use the synergy between the two. And also going forward, the gain potential does exist in India.

So that potential will be also taken into the consideration, and a lot of discussions and dialogue has been going on.

Sadahiko Hayakawa -- Vice President

Time is running short. So the next person will be the last person. Morgan Stanley MUFG Securities, Ono-san.

Masahiro Ono -- Morgan Stanley -- Analyst

Thank you. I'm Ono from Morgan Stanley. I have a question and confirmation regarding CMOS in the market. Supply chain CMOS sensor for mobile, Sony is lowering the price, and the market -- the inventory of mobile sensor is getting unhealthy, some people say.

And to the extent that you can share with us, what are the changes in the mobile? How do you look at the changes in the market? And in relation to that, last time, at the time of the first quarter results, mobile wafer unit price has gone down by 10% year on year. Currently, on a monetary amount basis, for mobile and for AV, mainly camera, the ratio is about 70% to 30%, according to my understanding. Including the first question, as you think about the mix in the future, there's going to be a further forecast upon AV or related to the question by Ayada-san, custom order will support next year and go back to mobile, which will result in improvement of profit. So can you please explain this? Sorry for the vague question.

Hiroki Totoki -- Executive Deputy President and Chief Financial Officer

Thank you very much for your questions. The market of mobile sensor, how do I look at this market? If I am to explain this, mobile market will continue to expand. And of course, for the industrial machine and for AV, stably -- it's stable and the margin is high. But in terms of the size of the market, mobile market is much larger.

You said 70% to 30%, but the ratio of mobile is even higher than that. Well, the inventory level of the sensor market, to the extent of my knowledge, by -- the kind of inventory, which will have a difficulty for negotiation with the customers, we do not hear such voices at all. Prices, it is in the course of negotiation and discussion with the customers, price is discussed. But when it comes to specific prices, I would like to refrain from referring to specific prices.

On our part, our policy remains unchanged. For high-end, larger size, this market will grow and expand. So this is where we can leverage the strength of our technology. Higher quality and larger number of pixels are more minute, and there is move to pursue both.

So depending upon the needs of the customers, we have to grasp the needs of the customers. And we will be competing in the field where our strengths can be maximized. So the big trend remains unchanged. The production capacity will be increased as demand increases and strengthen R&D.

This policy remains unchanged. That's all from me. Thank you very much.

Sadahiko Hayakawa -- Vice President

It's time now for us to end today's Q2 earnings announcement meeting. Thank you for your participation.

Duration: 74 minutes

Call participants:

Unknown speaker

Hiroki Totoki -- Executive Deputy President and Chief Financial Officer

Hiroyuki Inamoto -- NHK, Japan Broadcasting Corporation -- Senior Producer

Naomi Matsuoka -- Senior Vice President, Corporate Planning, Control, Finance, and Investor Relations

Sadahiko Hayakawa -- Vice President

Junya Ayada -- J.P. Morgan -- Analyst

Ryosuke Katsura -- SMBC Nikko Securities-- Analyst

Yasuo Nakane -- Mizuho Securities -- Analyst

Masahiro Ono -- Morgan Stanley -- Analyst

All earnings call transcripts

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