Sony Group's stock price soared! The market is hotly discussing the possibility of spinning off the semiconductor business, which could create the largest CIS giant.

Media reports, citing sources familiar with the matter, have revealed that Japan's technology and entertainment industry leader Sony Corporation (SONY.US) is considering spinning off its semiconductor business department for listing. This move is seen by the market as an excellent opportunity to unlock the value of this Japanese entertainment and technology giant. If Sony's semiconductor business department is independently listed, it will create the world's largest CIS semiconductor giant. Boosted by this news, Sony's stock price surged as much as 6.8% in the Japanese stock market, reaching a new high since April 1 and ranking at the top of the Nikkei 225 Japanese blue-chip stock index. The Japanese stock market was closed on Tuesday due to a holiday, and it rose by about 0.5% after reopening on Wednesday. According to the latest reports from the media, Sony may finalize the spin-off and listing of its semiconductor solutions business department (Sony Semiconductor Solutions Corp., also known as "SSS") as early as this year. The conglomerate also plans to spin off its financial subsidiary, largely in response to the calls made by Dan Loeb, founder of hedge fund Third Point LLC, years ago. Sony had previously rejected reform demands from Loeb's Third Point fund, which has since exited its Sony ADR in 2020. Andrew Jackson, director of Japanese stock market strategy at Ortus Advisors, said, "This is extremely positive for Sony's stock price. Although the market has been waiting for a long time, it has not been fully priced in before and there is still significant upside potential. If the spin-off plan includes distribution of physical dividends to existing shareholders, it will also be seen as another potential positive factor for shareholder returns." One source familiar with the matter stated that Sony is considering distributing most of the equity of its semiconductor business to existing shareholders, and after the spin-off, it may choose to retain a minority stake. Sony officials and representatives of its semiconductor business department responded by saying that the reports were based on market speculation, and there are currently no specific plans to disclose. Analysts from Citigroup, Gohta Eto and Takahiro Fujiwara, published a research report after the news of the acquisition was leaked, stating that the spin-off of the semiconductor business is "highly rational" and will have a continuous positive impact on the stock price; if the business is no longer consolidated, valuation is expected to continue to rise, according to these two analysts. Analysts Atul Goyal and Shunki Nakamura from Jefferies Financial Group Inc. also pointed out in their research report that if Sony's financial subsidiary and sensor business are both spun off, Sony will transform into a purely entertainment-oriented company, and the spin-off of the sensor business will bring stronger potential for revaluation, the analysts from the organization stated. The spin-off of Sony's semiconductor business may reshape the global semiconductor market landscape. It is understood that Sony's semiconductor business has long been a dominant player in the global image sensor field for major smartphone manufacturers such as Apple Inc. (AAPL.US), and is currently expanding its presence in the autonomous driving sector. Independent operations will give this business greater flexibility in decision-making, enabling it to respond quickly to market changes and expand financing channels, providing important support for its larger-scale entry into the field of autonomous driving "vision" and "perception." In the last fiscal year, this sector contributed approximately 1.7 trillion yen (approximately $120 billion) in revenue, but it is not clear whether Sony will choose to completely divest this business. In recent years, the soft demand for smartphones globally has led to stagnant growth in this business, and the additional costs brought by US tariff policies have further exacerbated the outlook for the smartphone industry. Sony's semiconductor business is currently facing downward pressure on profit margins, rising costs, and competition from Chinese chip manufacturers. With regard to the dynamic news that Sony is evaluating the spin-off and listing of its semiconductor business department, Sony Semiconductor Solutions (SSS), market expectations are that this spin-off will be a revaluation of the world's largest CIS image sensor supplier, and will allow Sony Corporation to focus on its "three pillars of content": gaming, music, and film. Some analysts suggest that the spin-off could be completed as early as this year, with the valuation of SSS possibly reaching as high as 7 trillion yen (approximately $490 billion). Many institutions believe that if the semiconductor business is no longer consolidated, the main body of Sony will continue to receive a higher premium on the stock market due to the profits brought by the spin-off. If the Sony Semiconductor Solutions company (SSS) is independently listed from the Sony group, it will become the world's largest CIS image sensor listed company, with over 55% of the smartphone CIS market share and approximately 1.84 trillion yen (approximately $120 billion) in annual revenue, leading the entire CIS industry. It is reported that SSS under Sony is expected to increase its operating profit by 40% year-on-year in the 2024 fiscal year, but when combined with Sony's gaming, film, and other businesses on the group's consolidated financial statements, it is "mutually diluted." Independent listing will allow investors to value the company based on semiconductor comparable companies (such as ON Semiconductor) valuation standards. For Sony's semiconductor business, in terms of revenue, capital expenditure, and market share, CIS is absolutely dominant, but at the same time, stake-holder ToF/SPAD depth sensors, laser radar light sources, depth perception sensors, ISP, micro-display, and other products for future layout, forming a unique technology matrix of "visual image + perception," the investment value of SSS after the spin-off will still be mainly determined by CIS pricing, with the remaining new businesses providing optional premiums. Sony's SSS, as a leading image sensor, is aggressively entering the field of autonomous driving with automotive LiDAR and edge AI intelligent sensors, as well as high HDR, anti-flicker, and ToF/SPAD depth sensing technology, which will fully expand its second revenue growth curve. The spin-off will inevitably focus on visual imaging and perception chips.Product research and development production, while the shareholders of the parent company Sony Group receive huge profits, and at the same time will focus more on entertainment and network media services with much higher profit margins, both sides can be said to benefit."Bonjour, comment a va?" "Hello, how are you?"