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 as yours.

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…

Thank you very much. It was Totoki, Executive Vice President and CFO. From now -- from 5 minutes to 4, 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.

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

Yes, we can.

I have 2 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?

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.

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

Asahi Shimbun Newspaper, [ Sasaki ]. Can you hear me?

Yes, please.

I have 2 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 towards. So is there a possibility that you'll be reducing your target? Can you elaborate on that? So these are my 2 questions.

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 towards 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.

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

This is [ Bam ] from Nikkei. Can you hear me?

Yes.

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?

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.

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

[ Masuda ] from Nikkei. Can you hear me?

Yes, we can.

I have 2 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?

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 3 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.

Next question, [ Nishida-san ], freelancer, please.

Can you hear me?

Yes.

I have 2 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?

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.

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?

Yes, we can, please.

[ Yaskawa ] from Nikkan Kogyo Shimbun. I have 2 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?

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 -- 1 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 1 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, 1 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, 1 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 1 yen lower. So that is JPY 111 versus -- against the dollar.

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.

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. [Break]

Thank you very much for waiting, ladies and gentlemen. Now we are going to entertain questions from the investors and analysts. [indiscernible] 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, JPMorgan, Ayada-san, please.

Ayada from JPMorgan. 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, towards 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?

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 is -- 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 3 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.

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

The supply chain issue including the pandemic impact and Page 22, cash allocation, on your slide. That included, I would like to ask 2 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 3 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?

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.

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.

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

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

Yes.

I had 2 questions. They are not related to the consolidated results this time. The first question is Mr. Yoshida mentioned in MLP connected to 1 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 group-wide, please let us know.

So your questions -- there are -- the questions from you, and I will answer 2 questions. And Matsuoka-san will supplement my answer. And the connection with 1 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 1 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 1 million people, I hope that you observe the trend and progress and give us your feedback. And second question, that is the group-wide 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?

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 2. 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.

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

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.

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.

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