Thank you for waiting. At this point, we'll start the session for the earnings announcement of Sony for the second quarter of fiscal 2018. And I would like to introduce our speakers. We have Hiroki Totoki, Executive Vice President, Chief Financial Officer; and Atsuko Murakami is Corporate Executive and Senior General Manager of the Finance Department; and also, sorry, Hirotoshi Korenaga is Vice President, Senior General Manager of the Global Accounting Division. So the results of the second quarter, the consolidated results and the full year forecast for the year will be presented. And that will be followed by time for question and answers, and altogether, we're going to spend 45 minutes. Mr. Totoki, you have the floor.

Thank you. I would like to explain these 2 topics in the next 15 minutes. FY '18 Q2 consolidated sales increased 6% year-on-year to JPY 2,182.8 billion, and consolidated operating income increased 17% year-on-year to JPY 239.5 billion. Net income attributable to Sony Corporation stockholders for the quarter increased 32% year-on-year to JPY 173 billion. This slide shows the results by segment for Q2. This slide shows the results for the first half of the fiscal year. This slide shows the results by segment for the first half of the fiscal year. Next is the consolidated results forecast for fiscal '18. The consolidated sales forecast has increased JPY 100 billion from the previous forecast to JPY 8.7 trillion, and the consolidated operating income forecast has increased JPY 200 billion to JPY 870 billion. Despite a downward revision in the Mobile Communication segment, the overall consolidated forecast was revised upward, primarily due to the impact of the consolidation of EMI Music Publishing, which I will explain later, and upward revision in several segments, particularly the Game & Network Services segment. In addition, income before income taxes was revised upward to JPY 975 billion, and net income attributable to Sony Corporation stockholders was revised upward to JPY 705 billion. For this quarter, we have started to disclose our forecast for operating cash flow, excluding Financial Services, and we expect it to be JPY 830 billion for this fiscal year. And we have changed the ForEx assumptions for the second half to JPY 112 to the U.S. dollar and JPY 132 to the euro. This fiscal year forecasts for each segment are shown on the slide, and we have incorporated JPY 20 billion contingency budget in All Other, Corporate and elimination. This amount was 90 -- JPY 73 billion in the previous forecast.…

Now floor is open to your questions. Those of you with questions, please wait for the microphone to be brought to you, and please identify yourself by stating your name and affiliation before asking the questions. When the question is asked in Japanese, it will be -- in English, it will be interpreted into Japanese consecutively, and the answer will be given in Japanese. [Operator Instructions] Yes, please.

My name is Ayada of Deutsche Securities. My question has to do with Semiconductors and game business. First, on semiconductor investment, Mr. Totoki earlier mentioned that compared to the previous level, the investment increase would be increased by about 20%. What is the background to this decision? What are the market needs, such as multicamera -- multisensor cameras or ToF sensors and second quarter wafer introduction? And what is the forecast for the third quarter? That's the first point. Second point concerning game business. Page 8 of supplementary information shows that full game software volume for PS4, there was 80% increase in the second quarter, and then software and add-on on the top increased by around 60%. Maybe the increased add-on sales contributed to the good result. Now the profitability increase of add-on to a large extent supported by one software title or the third-party titles, the multiple numbers support this profitability with a wider basis? What is the current situation? And also, what is the prospect for the second half and the next fiscal year?

Thank you. Concerning the capital expenditure in Semiconductor, and the scale would be increased further. The additional investment this time is to cope with the demand in 2020 basically. And we will operate the increased production lines in most of the buildings we have. And then the capacity, production capacity would be increased to a monthly level of 130,000 slices. And about the order inquiry, 0.8 micron, the image sensors for smartphone application, very strong demand. And also, the larger size of images themselves and also introduction of [ mutualization ] and the multisensor camera is increasing, and therefore, the demand is very strong in immediate future. And going on to fiscal '19 and fiscal '20, this strong market situation we regard as continuing about [ game. ] And another point, the additional investment this time include a 3D sensing for mobile partially, but in the main, to meet the demand increase in imaging application. And also, for vehicle or mobility, it's not included in our additional investment plan. And the next point has to do with the game business. As regards add-on, the business situation is very brisk, as you pointed out. And concerning add-on, several titles contributed to the profitability, and so we cannot simply point to a certain one title. And about the impact on profitability, during the first half, we were blessed with very good hit titles. And now immediately, the Spider-Man, this is a first-party title, again, selling very well. And we can expect to see a very big contribution to the second half result.

Next question, please.

Nishimura, Crédit Suisse. Two questions, please. Firstly, about smartphones business. You're going to reduce the operation costs further down, but still, you'll be in red ink next year. So in the next 2 years, the speed of loss reduction, how do you forecast that? And also, more fundamentally, you have been reducing your costs, but unit sales have been declining much faster than your cost reduction. So the risk does not seem to go away. Do you have the fundamental actions to remove that -- those risks altogether?

Well, we'll reduce the size of business operations, as I said. So that's the biggest action we are taking to reduce and mitigate the risk of the loss ongoing. And so cost reduction will continue towards 2020. But the impact of those efforts will take time before they appear. So in 2019, our operating loss will be there still, and the size of that -- well, the loss in 2018 will be halved in 2019. So 2019, loss will be likely half of the 2018 losses. But when we prepare business plans for 2019, we will scrutinize this business. So at the time when you close the books for 2018, we'll be able to give you a forecast for the next year.

The second question is about Semiconductors, related to the first question. Looking at the current situation, you revised upward by JPY 20 billion this business. The final demand for the smartphones, how do you look at the market demand and also your standing in that market? And also, the increase due to the size of image sensors is growing, and all these factors contributed to growth. Can you give us therefore more detail breaking down by these factors?

Well, first of all, the market trend of the smartphones, the market itself, the size of the market, the growth is only slight minimal in our view. In the last few years, market grew significantly, but now the higher definition for the front cameras and sensors are getting larger, and also, the multiple lenses are used on cameras. So those are the reasons why we expect the market to increase. But currently, the smartphone market as such is calling for competitiveness in terms of the camera features. The better camera features are the source of the competitiveness, and therefore, this trend is likely to continue for some time. And earlier, I talked about input, and let me cover that point here. Mr. Korenaga?

So the current capacity, the input or the master process, capacity now is 130k per month, so this remains unchanged from previously. In the second quarter, the wafer input on average is 99k per month. Again, this is exactly what you expected at the previous meeting. In the third quarter, next quarter, the wafer input, the capacity will be 100k. Against that, actual input will be 100k. In other words, we will have a full operation for the wafer production.

Our next question?

Nakane with Mizuho Securities. Two questions. First, I would like to ask Mr. Totoki, well, earlier on, you said macroscopically, the economic situation may be a bit murky, as you said, game and nongame entertainment and Branded Hardware. So in these segments, geographically, how do you view the economic situation? How has that been changing? Or has it not been changing? Now as we look at the second half, what are some of the hints? Qualitatively, what can you say? That's my first question. Secondly, I would like to ask this question to Murakami-san. Well, you gave us their cash flow numbers for the full year. Now looking at that, the JPY 830 billion, our number is based on -- well, could you give us a breakdown? And from the first half, JPY 550 billion, what has been changing? I think you were looking at JPY 700 billion before, in my memory. So how -- what -- how have things been changing? What do you have to say, including your view?

Well, about the economic situation by segment and by field, games, entertainment, about these, relatively speaking, this is not so greatly affected by the economic situation in these businesses. So the -- it will depend upon the hits of the titles. I think this is more of a factor. In this respect, the economic situation is not really impacting our business. That is my view. With respect to Branded Hardware, the situation is a bit different. That is because right now, televisions and also cameras, digital imaging, relatively speaking, they are high value-added products. They are higher end. So they may be affected by the economic situation more or less. With respect to our concerned geographical areas, North America, China, these regions -- well, particularly for televisions, the sales volume -- in terms of sales volume, we are dependent on these areas. So we're a bit concerned, so we'd like to closely watch the situation of these regions. Plus Europe, well, Europe right now, it's quite good. At this moment, we see no such signs, frankly speaking. But if you look at the stock market, it's the same in Europe. It's been declining, and so -- because of geographic risk of Spain and Italy, well -- and so we are impacted by Brexit, so we'd like to continue to watch the situation closely in these regions. With respect to Semiconductors, naturally, as overall smartphone market is impacting us. So particularly, we have to pay attention to the domestic Chinese market, the sales situation there. And also, the stock in the market for distribution, we have to pay attention. We have to keep a close eye on these aspects.

Now about the cash flow, thank you for the question. First, by segment, the second half and the first half, well, including my -- some of my views, let me explain. First, well, cash flow has been increasing, well, contributing positively to game and networks and service and Music, these 2 segments. As for games, in the first half, the profitability was good. And also, network business has been very good. And we have been collecting the funds fast, so we saw a positive operating cash flow. As for investing cash flow, there was no major investment, so there was a major positive contribution. And in the second half, with respect to the second half, we believe this situation will continue. Next, about Music. For Music, profitability was good, and so in the first half, the operating cash flow was positive. The stock sales with Spotify happened, but this was a positive aspect for the investment -- investment cash flow. Without adding sales of Spotify stocks, the operating and the investing cash flow was positive combined in the first half. As for second half, we have been witnessing a good trend. As for Semiconductors, in the first and second halves, the business has been brisk. But on the other hand, when it comes to capital investment, that has been good. So operating cash flow is a major plus, but there was a negative for the investing. So well, on a net basis, I think it is likely or there is a possibility that it might be negative. As for branded products hardware in the first half, the operating funds tend to increase. So as for the first half, it was negative, and as for the second half, I think it will come back again a bit. As for Pictures, in…

Next question, please. Yes, please.

Ezawa of Citigroup. So one question. Concerning the capital expenditure in Semiconductor and the profitability, the balance between the 2, to what extent the increased capital expenditure will be accommodated? It is increased and also advancing of the plan, and you will be working on the increase, so 130k per month. And if there is increase continuously, as it was mentioned, Semiconductor free cash flow will continue to be negative. And then there may be a time where the market cycle would work and the current plateau may change, and that would make the situation to a major negative. How are you going to exercise good control over such possible changes? And also, in addition, in the Sony Group strategy, you are talking about recurring profit in the entertainment business, although Semiconductor business may not quite fit in that business strategy, and this business valuation is very high. What about selling this business? Would you look into that? And if you have any view on this, please share that with us.

As you mentioned, the capital expenditure, they're very -- the Semiconductor business is very capital-intensive. So we remain very careful and cautious about proceeding with this. This capacity increase this time around is, as I mentioned, to meet the demand leading to 2020. And I mentioned the production capacity per month of 130k. In the existing buildings, we can increase the production up to 136k. We are looking into such an expansion opportunity. So using the existing buildings as much possible, why are they increasing the production capacity? That's the first line of thinking. And then going beyond that, as regards capacity, that is we will look at the demand beyond 2021 and very cautious about it. And how to manage the risk? The best way is to carry out the investment at the correct timing and, at the same time, try to increase the profit margin and direct our efforts to that. On our side, the imager for smartphones, our margins is about 20% plus. And for 2025, we'd like to increase this margin further and look into this from various angles. And in terms of group strategy, how do we position the Semiconductor business? On our side, Semiconductor business itself enjoys the technological advantage we have. And going beyond the smartphone, the IoT and mobility, like vehicle application, these are the future areas we look into in expansion of the business. In the smartphone business, not just sensors but demand for sensing is increasing. And to cope with such increasing demand would be necessary for us as business, and it is the core of business strategy as well.

Next question, please.

Sugiyama, Goldman Sachs. Two points, please. First of all, these results for the first half, looking at the results, game, Music and Pictures, profits are more than half of the total. And listening to your discussion about the cash flow, in terms of cash flow generation, they accounted for the very large part -- portion. And also, your plan for the full year profitability, there are some onetime factors, but incorporating that, [ PR ] turns out to be 10.5. So game platform, Music, Pictures, which account for more than half, the multiple -- the difference in multiples are -- is very large. Now you have improved your business, you have recovered your business. But in terms of increasing and improving the enterprise value of Sony's, what's your view? And what's your view on the appropriateness of your business portfolio? Do you have more active, proactive strategy perhaps to improve the corporate value of Sony itself? And secondly, related to this is the game business. Your forecast has been revised upward, and you're reducing the promotion cost for PS4. Are you going to delay the price cuts on PS4? I would assume so. The life cycle of PS4 is longer probably than you had expected earlier, it turns out to be. So midterm plans that you have recently announced, it's new. So your game profit expectations at 30/10, now it's about half of that. So there's a significant gap. Why do you allow this gap to happen? Could you explain?

Your first question about the game and Music and contents business, as such, the multiple, but for that multiples for these segments seem to be low, and increasing the corporate value, of course, is an important agenda for us. And so more than before, we would clearly look at that and explain about the business portfolio, the contents of our businesses. And also, in comparison with our peers, we will try to explain the advantages we have as well as the future prospects. And [ so to clearly ] explain that to our stakeholders is something that we are going to do to make sure that they understand we're trying to improve our corporate value. And also, the game business, part of the improvement in profitability is a cost reduction in [ premiers. ] And I cannot say anything about price reductions here, but just now the sales of PS4, very brisk, thanks to the strong contents. There's a synergy effect. So this year, the annual forecast for the unit sales has been revised upward for PlayStation 4. And also, compared to these sales numbers, our target for 2020 in major terms, what is the level we are looking at? Well, we are not changing our target for that year. But again, the momentum we have in sales and profits recently, they exceed our numbers that we assume in the midterm plan. The momentum now much stronger, therefore, we will have to improve the accuracy of our forecasting going forward.

Next question.

Katsura with Nikko Securities. I have 2 questions. They may be related with each other. In the supplementary information, Page 6, about inventory. What's your thought compared with the previous year? It's been controlled in each business. I think the situation is mixed. You explained, well, something, but additionally, if you could give us more explanation. The background is that the Game volume has been revised upward, and smartphone, naturally, it's been revised downward quite dramatically. So what's your -- what are your thoughts? That's point number one. And secondly, about the risks in the second half, particularly about the Branded Hardware, you explained that. But when it comes to the contingency budget, I think this has been brought down. So I think it's been made visible. I think the actual has been incorporated in it. But in reality, in the first half, well, how much was added to the plan?

If you look at the games, perhaps it's, well, increased to the proportion of the second half Q2. As for inventory levels, Game Network & Service (sic) [ Game & Network Services ], in this segment, the momentum has been good of late, and well, actually, there's some shortage. That is our understanding. When it comes to other areas, broadly speaking, the inventory level is appropriate. So right now, there's some downside risk with respect to the future economic situation over the last 3 months. That's the way we are looking at it. So we have been paying more attention to the inventory levels. That's what we have been saying to the business units. So I think the level has been controlled properly. That's my impression. And as for the second half, as for the Branded Hardware, in -- the real risk, it's very hard to say. But the -- I don't feel any risks that cannot be managed, frankly speaking, but the risk of sales slowing down might be there somewhat. To look at it further, on November 16, the China -- or the November and December, what would be the sales in China? That's what we are looking at very closely. The National Foundation Day was rather weak, so we are paying a lot of attention to what will happen in November and December. And what was the last question?

It appears that the risk has been controlled, but compared with 3 months earlier, what's the current situation?

Right. Compared with the 3 months before, the risks with respect to -- as can be seen from the way to use contingency budget, the greatest risk has been the mobile phones. And so the -- I think the contents of the plan has been quite appropriate, so that's been incorporated. Well, about the MLCC or components, sorry, about that point, that's been gone. Thank you.

And this is going to be the last question due to time.

Yasui of UBS Securities. The first question, the actual results of Semiconductor in second quarter, year-on-year, the -- it is increased in sales, but the profit is flat and the full operation. What are the reasons behind? And the second point, the Music, the Media, the Fate/Grand Order is included. And compared to previous year, after a long interval of increasing, there has been flat. And so in MRP terms, what is the future outlook over the previous year? Do you think the increasing speed has peaked out?

Over the previous year, talking about the Semiconductor business results, the previous year, we sold the camera module business and also the insurance income concerning the disaster impact, and so we had a special factor of elevated profit. And that impact is reflected on the current year's result of the Q2. And Music, the fourth quarter's impact, I think, is felt on the first quarter. You're talking about second quarter? Okay. For the first half, indeed, sales increased, but R&D expenditure and the increase in amortization, depreciation and also the decline in the revenue of AV and surveillance sensors. And so the profit declined due to those factors.

May I? Fate/Grand Order, what is the profit situation over the previous year?

We do not disclose the numbers per se, but the profit situation over the previous year, no major changes we witnessed up until now.

With this, we'd like to close the earnings announcement session. Thank you for coming today.