* Lifts full-year forecast to Y630 bln from Y500 bln
* Cites demand for image sensors, high-end TVs
* Previous record Y526 bln set on solid sales of first PlayStation
* July-Sept profit jumps to 350 pct, beats estimates (Adds more CFO comments, context)
TOKYO, Oct 31 (Reuters) - Japan's Sony Corp on Tuesday said it expects to book its highest-ever profit this year, underscoring the success of Chief Executive Kazuo Hirai's restructuring that refocused the electronics and entertainment firm on image sensors and gaming.
The milestone confirms the renaissance of Sony, one a byword for technological innovation whose earnings peaked in the year ending March 1998 thanks to strong sales of its first PlayStation games console.
But it spent the next decade in price wars with emerging consumer electronics rivals from South Korea and China whilst being outclassed by Apple Inc's game-changing iPod and iPhone portable devices.
Hirai's ascent in 2012 sparked a restructuring drive that saw Sony streamline unprofitable electronics businesses and capitalise on the spread of smartphones with its image sensors whilst retaining a living-room presence with its consoles.
Setting a new record "means we have been unable to outgrow ourselves for 20 years," Chief Financial Officer Kenichiro Yoshida said at an earnings briefing. "Our next challenge is how to maintain high profit levels, and that's the biggest theme in the midterm business plan we are compiling."
Sony raised its full-year operating profit forecast by 26 percent to 630 billion yen ($5.57 billion), citing strong sales of image sensors as well as high-end television sets. That compared with a Thomson Reuters Starmine SmartEstimate of 585.81 billion yen drawn from the views of 26 analysts.
The forecast is 20 percent above its current profit record, set when strong sales of consumer electronics coincided with the popularity of the first PlayStation and its entertainment business' box-office hit "Men in Black".
For July-September, profit jumped almost 350 percent to 204.2 billion yen, outstripping analyst estimates.
Sony's stock price has reached nine-year highs since Hirai embarked on the firm's overhaul. But the price has plateaued in recent months due to scepticism about future growth, when the PlayStation 4 enters the late stages of its life and a profit boost thanks to recovery from earthquake damage disappears.
Damage to a sensor plant last year left the semiconductor division, which include sensors, reporting a loss. Sony expects profit of 150 billion yen this year, an increase of 15 percent from an earlier estimate due to a rise in its outlook for demand from Chinese smartphone manufacturers.
To develop new profit drivers, Sony has boosted investment in artificial intelligence to catch up with U.S. technology peers such as Amazon Inc and Alphabet Inc.
It unveiled its Xperia Hello! voice-activated communication robot this month and is widely expected to revive robotic pets, similar to its robotic dog AIBO that went on sale in 1999. It also aims to lead the budding virtual-reality market by drawing on the content portion of its business such as music and film.
In sensors, Sony is trying to grow in automotive, where demand is rising as vehicles increasingly feature functions based on sensing technologies such as autonomous driving.
Yoshida said Sony is also working to stabilise profit by expanding businesses that generate recurring revenue, citing as an example revenue from in-game purchases. ($1 = 113.1200 yen) (Reporting by Makiko Yamazaki; Editing by Christopher Cushing)