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March 14,2002



Accelerating Strategic Linkages between Core Sectors to Create Group Corporate Value
Sony Fiscal 2002 Corporate Strategy


Tokyo, Japan

For the coming broadband era - Electronics, Game and Content, which are deployed on a global basis, will be the three core sectors to sustain Sony's growth. Sony continues to identify key businesses within each core sector and to concentrate resources in these areas, aiming at strengthening competitiveness and maximizing the overall economic and brand value of each core sector. At the same time, Sony has established the Network Application and Content Service Sector (NACS) on April 1, 2002, which will support the core sectors and allow them to mutually reinforce each other.

Sony will also continue to create new business models through the promotion of "soft alliances" with partners outside the group, the development of network based financial settlement services centering on Sony Finance International, Inc., and the promotion of "My Sony Card" in its financial services sector and other sectors. Through these endeavors, Sony believes that it will be able to achieve a unique corporate position in the broadband era as a global media and technology company.


Group Corporate Strategy
1) Mission for Three Core Sectors

- Electronics
Develop attractive digital products for the home and mobile environment to become the top Network Consumer Electronics Company
- Game
Evolve current game business and develop a completely new broadband computer entertainment industry
- Content
Establish a leading position as creator and distributor of music and picture entertainment content for the broadband age (network distribution etc.)

2) Creating a New Business Model through Strategic Linkages between Core Sectors

- The Network Application and Content Service Sector (NACS) was created on April 1, 2002. Its mission is to ensure that our three core sectors are linked effectively through network services which will create synergies and new horizontal business models.

- The strategic linkage between our core sectors promoted by NACS will ensure that the Sony group retains a leading position in the key business areas of the broadband network society. Sony will concentrate the resources of the entire group to create new, appealing products and services for the future.

3) Soft Alliances to Create an Open Operating Environment

Sony will actively seek partners who share our vision to create a truly open environment for the broadband future. We will continue and strengthen our strategy of soft alliances with these partners.


FY2002 Sectoral Overview

Electronics
1) Strengthening the platform for AV/IT Products Geared to the Broadband Era

- Enhancing gateway products (Home AV products centered on Wega and mobile AV/VAIO products including mobile phones)

- Promoting connectivity of "client" products to the above gateways and PS2 (Digital Still Camera, Camcorder, Net MD etc.)

- Identifying the device business as a core engine to differentiate products in the growth areas listed above and thus maximizing total profit

- Creating new business models based on the integration of network services and content

2) Further promotion of structural reform to strengthen corporate system and ensure profitability

- Enhanced productivity and appropriate operational scale through strengthened global EMCS system
- Inventory Control further strengthened through enhanced Supply Chain Management
- Target of 10% cut in consolidated inventory by end of FY02 (FYE, March 03). Inventory stood at ¥513.4 billion at end of FY01.
- Continuation of "concentration and selection" policy
- Aiwa brand will use the Sony production and sales platform to the fullest extent to respond to the challenge of commodification.

Game

- PS2 has secured its position as the leading computer entertainment platform. PS2 business will now be expanded and continuing profitability confirmed (hardware/peripherals/software).

- PS2 Broadband development will continue in order to make it a computer entertainment platform for the network era.

Content

- The core business of content creation will be strengthened and profitability enhanced while improvements continue in operational efficiency. Digitalization of picture content will proceed and new artists discovered and developed.

- Linkages with electronics and game segments will be forged and the creation and network distribution of digital content (game/picture/music) further strengthened.

NACS

- Sony's network service business will be positioned in order to create new business for the broadband era through the linkage of Sony's operational sectors. The key areas for linkage will be:

* Hardware: Network Compatible AV/IT products, PS2 etc.
* Network Services - The ISP So-net as well as the contactless IC card technology FeliCa and its related settlement services Edy and eLIO
* Content - Game, Music and Picture sectors.

- With NACS at the core, Sony's network service business will be reorganized and strengthened with the objective of creating a common group platform which will contribute to increasing corporate value.


Financial Services

Corporate value will be enhanced through strengthening financial services from each company. The possibility of a capital partnership between Sony Life Insurance Co., Ltd. and a major US or European life insurer will continue to be evaluated. The objective is to strengthen the operational base of Sony Life and secure long-term growth for the company. Financial services and network services will be expanded through the development of Edy/eLIO settlement services promoted by Sony Finance International, Inc. and the introduction of the My Sony Card from April 2002.


REFERENCE

FY2002 Electronics Business Strategy


R&D

R&D Laboratories were reorganized as of April 1, 2002 in order to strengthen R&D functions through enhanced focus on key technological areas and more effective linkage of research to product development.

- New laboratories established which integrate the technology domains of existing corporate labs. Laboratories to focus on component technology or applied development with component technology at the core.

- Technology management system solidified with Chief Technology Officer (CTO) at the top.

Main areas of research: Displays, Storage, Materials, Network Applications


Technology/Device
Strengthening core device development as enhancing agent for net-compatible AV/IT products

1. Display Devices
Developing devices for flat panel displays/pursuing development of technology for high quality/high resolution pictures
(1) Product development using Sony proprietary technology
- Low-temperature polysilicon LCD (for mobile AV products)
- FED/OEL (for home displays)
- High-temperature polysilicon LCD/GLV*(for Home Theater/Projector)
* GLV: Grating Light Valve

(2) Product development and procurement in alliance with other companies
- Amorphous LCD (for computer displays) PDP (for home displays)

2. Optical Disks
- DVD +/- RW, Blu-Ray technology development etc.; further strengthen device development

3. Semiconductors
- Joint development of most advanced semiconductor production process technology with IBM, Toshiba, SCEI to continue with a view to breaking out of purely game-oriented uses and applying to consumer AV devices.

- Joint development with Toshiba of System LSI process technology for image processing in network compatible products (by end of FY 2003).

- Promote internal development of LSIs for dedicated use in Sony products, in order to differentiate from competitors (e.g. single chip LSI for MPEG signal processing in Network Handycam IP and signal processing chips for cameras.)

- Differentiate products through strengthening areas such as CCDs, high temperature polysilicon LCDs, bipolar that are generating high profit.

Network Connectivity of Gateway/Client Products

Development of net-compatible VAIO, Home AV and Mobile AV products
Schedule:
Phase 1: Begin construction of network with VAIO as home server
Phase 2: Market introduction of network compatible Home AV products centering on Wega


New Product Categories to Sustain Growth Strategy

1. Home AV

- Strengthen development of FED/OEL
- Expanding disk business from DVD players to DVD +/- RW and Blu-ray
- Market introduction of net-compatible Home AV devices (in addition to PCs)

2. Mobile AV

- Products like Digital Still Cameras, Camcorders, CLIE, Net MD etc. which until now have been connectible to PCs, will connect directly to Net-compatible Home AV products. This will give high added value and differentiate from competitors.
- Sony will continue to cooperate with Sony Ericsson Mobile Communications from the AV/IT technology, device and design perspectives.

3. VAIO

- Maintaining the superior value and leading position of VAIO
- Develop unique applications in order to strengthen linkage to Mobile AV and Home AV products
- Development of services based on VAIO through liaison with NACS


Production and Inventory

- EMCS will work to achieve the optimal worldwide production system.
Cooperation in production activities (technology support, efficient manufacturing allocation) will be strengthened between Japan, South-East Asia and China.

- The work of the Procurement Center and allocation of basic materials to Network Companies and production facilities has been centralized under EMCS as of April 1, 2002. Costs will be reduced through centralized purchasing practice.

- Consolidated electronics inventory is targeted for reduction by 10% by end of FY02 (¥513.4 billion at end of FY01.)

Distribution and Sales (Japan)

Sony Marketing (Japan) Inc. has adopted a new sales and marketing system in response to changes in the domestic distribution environment.

- In addition to the existing structures based on product categories, a new organization will be established focusing exclusively on mass-retailers.

- Marketing functions will be strengthened in order to respond to demand for broadband era products, network services etc.

- AV/IT sales functions will be integrated to more effectively deal with changes in the distribution structure.


Reductions in Headcount/Consolidation of Production Facilities

At the end of FY01, the consolidated number of permanent employees was approximately 150,000. This has been reached in advance of the original target for reduction of employees.

As of May 2002, the number of production facilities was 54. This has been reached in advance of the original target.


Sony Organizational Chart


Electronics-Related Business Organization