Sony is in advanced talks to acquire Toshiba's sensor business for about ¥20bn (£108m, €149m, $165m) to help strengthen its dominance in the market of smartphone camera components. The deal is likely to be announced soon.
Toshiba, which operates in various business verticals ranging from laptops to nuclear power, is undergoing a restructure of its lower-margin businesses as part of its chief executive, Masashi Muromachi's strategy after he took over the reins following the accounting scandal.
As part of this restructure, Toshiba intends to sell its image sensor manufacturing plant in Japan and exit completely from the sensor business. This deal will allow Toshiba to focus on energy, flash memory and health care.
This is an important deal for Sony as image sensors are a core component of digital cameras and smartphone cameras and are currently serving as a new cash cow for the company that has struggled to earn money in recent years from its electronics business vertical.
This business marks a comeback for Sony as it has already become a dominant player in this vertical with clients such as China's Xiaomi, India's Micromax Informatix, apart from Apple and Samsung Electronics, who all use Sony's sensors in its smartphones.
In April, it was reported that Sony expected operating profits to more than quadruple in the year, with strong sales of camera sensors and cost cuts.
This will not be Sony's first acquisition in the sensor business. It recently acquired a small Belgian sensor-technology company. The Japanese company has also raised capital to increase the production capacity of its components to keep ahead of its rival peers such as Samsung and OmniVision Technologies.
According to analysts, the demand for sensors is likely to grow not only because of increased demand for smartphones, which may soon come with three or more cameras, but also because other products such as cars are adding sensors to collect data.
Sony chief executive Kazuo Hirai earlier said that his company was in discussions with car manufacturers to supply its image sensors.
The sensors business is a small part of Toshiba's large empire but its technological expertise coupled with history of flash memory chip manufacturing is a potential threat to Sony as the industry leader.