TOKYO (Reuters) – Sony Corp raised its annual profit outlook on strong sales of smartphone image sensors after reporting a smaller-than-expected decline in quarterly profit, but it warned of an impact from the Wuhan coronavirus on its global supply chain.

Demand for image sensors has been strong enough that even with its plants operating at full capacity Sony has been unable to pile up planned inventories, Chief Financial Officer Hiroki Totoki said at an earnings briefing on Tuesday.

But he said sensor shipments could be disrupted if the spread of the coronavirus forces client smartphone makers to suspend their assembly plants in China for a prolonged period.

The virus outbreak could also rattle supply chains for its PlayStation gaming hardware and other consumer electronics, he said.

“We can’t deny the possibility of the virus threat expanding to a scale large enough to wipe out our latest upward earnings revision,” Totoki said.

The Japanese entertainment and electronics firm raised its annual operating profit forecast by 5% to 880 billion yen ($8.1 billion), roughly in line with the 878.47 billion yen consensus of 22 analysts compiled by Refinitiv.

For the October-December quarter, profit dropped 20% to 300.1 billion yen, still beating the 271.07 billion yen average analyst estimate. Excluding an accounting gain linked to the acquisition of music publisher EMI and that boosted profit a year earlier, the latest quarter marked a profit increase.

Sony’s sensor business continued to thrive as smartphone makers compete to adopt larger image sensors and multiple lenses on embedded cameras for improved picture quality, driving quarterly profit at the business by 62% to 75.2 billion yen.

The Japanese firm controls about a half of the world’s image sensor market, supplying most global smartphone makers including Apple Inc and Huawei Technologies Co Ltd.

To reduce dependence on smartphones, Sony has been working on sensors for automotive applications.

Meanwhile, Sony’s gaming business saw profit fall 27% to 53.5 billion yen as sales of its six-year-old PlayStation 4 console continued to decline.

The firm has said the PlayStation 5, scheduled for release this year, will feature better graphics, advanced haptic controllers and other improvements.

Sony’s share price has shot up more than 40% over the past year to its highest in nearly two decades – a vote of confidence for Chief Executive Kenichiro Yoshida’s ability to retain momentum after a corporate turnaround led by his predecessor.

($1 = 109.0200 yen)