OVTI (MM)

TOKYO—Sony Corp. is likely to strengthen its image sensor business by acquiring a competing arm from Toshiba Corp., people familiar with the matter said Saturday.

Sensors are a core component of digital cameras, including those in smartphones, and the deal highlights the importance of the devices to Sony, which has been on the comeback trail after struggling for years to make money in electronics.

The Sony-Toshiba talks are at an advanced stage and the decision is likely to be announced soon, people familiar with the matter said. The deal amount is expected to be several tens of billions of yen, or several hundred million dollars. Japan's Nikkei newspaper earlier reported the talks.

Image sensors serve as a new cash cow for Sony because it supplies them for smartphones such as Apple Inc.'s iPhones and Samsung Electronics Co.'s Galaxy phones. The business is smaller for Toshiba, but its technological expertise—backed by its long history of flash memory chip manufacturing—is a potential threat to Sony as the industry front-runner.

Sony is heavily investing in camera chips to keep its lead over rivals such as Samsung and OmniVision Technologies Inc. Sony raised fresh capital to beef up the component's production capacity earlier this year, and it also recently purchased a small Belgian sensor-technology company.

Analysts say market for sensors is likely to grow, in part because of smartphone demand—some phones may soon come with three or more cameras—and because other products including cars are adding sensors to collect data.

Sony Chief Executive Kazuo Hirai said this week at a Wall Street Journal conference that the company is in discussions with car markers to supply its image sensors.

For Toshiba, the deal will accelerate its effort to shed loss-making businesses to focus on energy, flash memory and health care. Toshiba's president and most of its board resigned recently after an accounting scandal in which the company acknowledged irregularities that made its low-profit businesses look better.

Sony reports its July-September earnings on Thursday, while Toshiba plans to do so by the first half of November.

Write to Takashi Mochizuki at takashi.mochizuki@wsj.com

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(END) Dow Jones Newswires

October 25, 2015 20:55 ET (00:55 GMT)

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