Using information from both Exhibit 2 in the case and R&D expenses table (below), (1) calculate Research and Development (R&D) intensity in five segments (Game & Network Services, Home Entertainment & Sound, Imaging Products & Solutions, Mobile communications, Semiconductors) in 2017 and 2018, and then (2) identify the segments with highest R&D intensity in each year. (Note: R&D intensity = R&D expense Sales)

Exhibit 2: Sony Group Sales and Operating Income by Segment FY2018 Results by Segment FYIT Change FX Impact 1.9-43.8 2.310.9 Game Network Services G NS) Operating Incorna 177.5 311.1 Sales 800.0 BOT.5 #7.5 Music Operating income 127.8 232.5 1,011.1 9:86.9 #17 Pictures Operating Income 41.1 Home Entertainment 1.222.7 1.155.4 Sound HEAS Operating income 85.8 Imaging Products & 855.9 Solutions IPS Operating income 74.9 M.Q Mobile Communications 723.7 (MC) Operating loss -27.6 #20 Salon 850.0 879.3 40.1 Semiconductors Operating Income 1640 201 1.228.4 1 242.5 Financial Services Operating income 178.9 161.5 -17.5 407.2 345.7 All Other Operating income -23.5 -11.1 #12.4 298.8 -271.0 Corporate and elimination Operating income -64.1 -7AT -106 8.54.0 1.665.7 Consolidated total +121.7 Operating income 731.9 Source: Sony Investor Relations, Earnings Releases, FY2018 Presentation. https://www.sony.net/Sonyinfo/IR/library/presenter/ archive.html.. 'I. R&D Expenses (Yen in billions) ' . ' FY 2017 FY 2013 Game & Network Services _ 106.2 , Home Entertainment 8: Sound 47. 3 58.0 Imaging Products & Solutions m 58 6 Mobile Communications 117. 6 107.2 44-9 " \f56R! CS]. E1165 risit. prot-oriented}. but he noted that "being a 'corporate lab' is a difcult balancing act: place big bets on the future. but don't spoolt the people giving you the money.\" X brought together a diverse group ofinventors and entrepreneurs to create a it}: impact on the world's most intractable problems. K focused on projects that demanded the aspiration and risltiness of fundamental research with the speed and ambition ofa starrup. Its projects incl udcd Waymo l[self-driving cars}. Tidal {underwater sensing and perception}. Verily {sensors and software for life sciences]. and Maltani [energr ltitcs to generate energy from wind}. K encouraged its researchers to identify rislts early by testing the most challenging aspects of their concepts as soon as possible in the REED process. Several K projects became separate business entities under the Alphabet umbrella. but overall. X was not a revenue generator for the organization: no blockbuster commercial product had yet emerged from K's factory." At the end of 2019. X was brought back under the l(ioogle umbrella when Sergey Erin and Larry Page stepped baclt from the day-to-day management of the company they had founded. naming Sundar Pichai as CEO of both Alphabet and Gooe. This move to fold X into Google was a tacit admission that the attempt to create business discipline For Fundamental research had failed. MIT Media Lab Founded in \"is 5. MIT's Media Lab was an unusual hybrid ofacademic program and research- focused lab. It tool: an actively 'antidisciplinary\" approach to its research. seelting our ideas that fell into \"white spaces" between fields of studythe areas that would traditionally be most dillicult to acquire either federal or private funding to explore.\" The lab was 3096 funded by corporations. which in exchange received membership in a consortium. giving them access to interactive demonstrations. opportunities to recruit the labs students. opportunities for cross-company collaboration and networking. and. perhaps most important. opportunities For commercialization of the Media Lab's research. Any IP resulting from Media Lab research was shared among all corporate members. under a non-exclusive. royalty-free license agreement. in perpetuity.\" The funding itselfwas not designated for a specific purpose. which allowed the corporate members to absorb the rislt for the most experimental of Media Lab research. In practice. however. the Media Lab's patents were rarely commercialized. A former director saw the Media Lab's role as one of pure discovery. not problemsolving. "Once we have done that discovery and development. our member companies talte those inventions and commercialize them. 1When: other people start getting into an area. we try to get out."""I The Path Forward Kitano wanted to specify a plan For Sony CSL that would secure its future within Sony and as an innovative force in the world at large. He wanted Sony CSL to outlive him and sustain its unique culture. Kitano identied three dimensions along which he needed to outline the future of Sony (ISL: structurefgpovemance. scaling social and business impact. and. measuring performance. \fsystem that indicated the project's health. if Sony began establishing some standardized milestones For the lab. it would allow transparency For the success or Failure of a project. and as with K. might encourage "Fast Failure"essential|y giving researchers the Freedom to shutter a project and move onto something more promising rather than waste ten years on something that would never be successful. Dening a standard set of criteria that could be applied across such a wide variety of projects would be a challenge. however. How long should an idea be given before it must bear Fruit or be terminated? Further. Kitano was worried about stiing Sony (ISLE atmosphere of Freedom to create and ideate. Establishing a standard set oF criteria to measure all projects equally might be impossible. given the wild variety oF Sony CSL's portFolio. Perhaps. he thought. it could be done on a project-hy-project basis. with the researchers themselves dening success. Each researcher could sketch out the stages oF their project. From ideation to maximum impact. dening the success criteria at each stage. When the project was Funded. this description of stages and success criteria would be agreed upon by both the researcher and the president. The terminology used to describe the stages and criteria could be somewhat standardizedFor example. impact on Sony's revenue. media mentions. bibliographic citations so that the strength oF the overall portFolio became evident. as every project could be compared to the others. These metrics could be designed to evolve. This approach had the benet of aslting researchers to thinlt out the Full impact othheir research. However. the cost oFthis approach would be the signicant burden on each researcher to plan these criteria; it might even necessitate hiring extra stall. to produce this documentation. The uncertainty surrounding metrics extended to the performance oF Sony CSLE portFolio. Most of Sony CSLE research wotdd not likely Fall into the "superstar\" breakthrough category. Assuming that a successFul outcome meant either increased revenuefsavings For Sony or a major impact on the world. the next president oF Sony CSL might only need one such success to justiFy Sony's continued investment in Sony ESL {and to justify the CED's Faith in Kitano's successor as a leader}. IF. however. the portFolio contained only moderately successful projectsthose with only a marginal benth to Sony BUs. an incremental innovation to an existing product. or technology that Fell somewhat short of expectationsthen it would become more diicult to justify Sony (ISLE existence. and trust in the new president's leadership might be shaken. But iFa breakthrough project would not generate business impact For ten or more years. how could the new president's performance be evaluated annually! One approach might be to hold an evaluation For the president only aFter a certain number oF years and have it done by Former Sony CSL presidents. board members. and Sony Group representatives. In the interim. the president would have sole discretion over hiring and allocation oF resources. Incentives and compensation would be based on the nal outcome. not measured along the way. Evaluating performance in such large time increments would deliver a clear message to Sony CSL's president about the scope of Sony's expectations For his lab's performance and the investments he made in the researchers and their projects. See Exhibit 9 For hypothetical examples oFdiFFerent approaches to performance review and evaluation othhe Sony ESL president and oFa Sony CSL researcher. \fIEEll Sou"! CS 1 Exhibit 3: Sony CSL Mission Statement and Goals Rosoareh for the Future of Humanity Research opens up the hiture. nd so this hiture rst exists in the imaginations oi'researchers. Sony Computer Siience Laboratories' {Sony CSL} support of researchers with extraiirdinary imaginations is what maltes it a place that is helping to create a Future beyond most of our wildest dreams. We declare that we conduct research for the hiture of humanity. Htunanltind has astonishing potential and great diversity. Bringing out people's maximum creativity, intellectual power, and physical apabilitics, and then using technology to go even further, is how we will continue to unloclt htunanityis potential. People using technology to extend their abilities could be thought of as the next stage oi'our evolution. with the potential to malte signicant and rapid leaps forward. Humanity has this great potential, but it is also confronting exceedingly difcult problems related to the environment, poverty, aging, food, health, medicine and more. These problems are complicated as well as diversewe are going up against an extremely harsh reality. In order to solve these problems, I believe we will need entirely new ideas that go beyond borders, and exceptionally effective ways of putting these ideas into practice. on our 20th anniversary, we at Sony CSL proposed moving from an approach to science based on closed systems to an approach based on open systems. We called it Open Systems Science. llil'pen systems are systems made up of complex, interacting elements, with boundaries that cannot be clearly dened; global society and the environment are two textboolt examples. W'hen we at Sony C51. come up with a creative idea, we are not incited into limited knowledge networlts. Moreover, a humanity that has extended its abilities with technology is itselfan open system, connected to both natural and social structures. 1With its focus on complexity, optnness, and uniqueness, open systems researdi could. also be described as an attempt to tackle the challenge of engineering extremely important but hitherto unrepmducible phenomena. This sort of research requires a combination ofeinpirical science. stimtid, and art in its original sense oido, skilled craftsmanship, redened in the modern context. In order to solve the problems diat naturally arise when attempting to create such a system. wemustintegrateknowledgefromawiderangeol'domains,andatthemmetimegobeyond academic research and actually head into the eld to put our ideas into practicthin some cases, we must continue our research whilst engaging ourselves in this system reibrm. This line of thought led us to the Sony CSL motto: iiiict beyond borders.\" We feel it is our duty to solve problems. open new possibilities. and offer something to the world by transcending borders between nations, between scientic elds, and between scienoe and. busine. nd ci11cial to this is the imagination and drive of our individual researd'iers. in a sense, you could say that each of our researchers is battling the very limits of his or her imagination. People have asked us if these wild ideas of ours will ever come true. Can we imagine the things that will happen, R&D Expenses (Yen in billions) Segment FY 2017 FY 2018 Game & Network Services 95.6 106.2 Home Entertainment & Sound 47.3 58.0 Imaging Products & Solutions 58.6 58.6 Mobile Communications 117.6 107.2 Semiconductors 44.4 44.9