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CMOS image sensor market heads downhill

Posted: 30 Aug 2007 ?? ?Print Version ?Bookmark and Share

Keywords:CMOS? image sensor? downhill market?

After a period of rapid growth, the CMOS image sensor market has lost steam.

Micron Technology Inc., the world's largest supplier of CMOS image sensors, could be in the process of spinning off that business amid a slump in the sector, according to recent reports.

It's also been a topsy-turvy period for OmniVision, Samsung, STMicroelectronics, Toshiba and other suppliers in the CMOS image sensor arena.

"The first half of 2007 has been a disaster for CMOS image sensor suppliers," said Robert Lineback, an analyst with IC Insights Inc. "This is mostly due to the decline of orders from the cellular phone segment. This correction continued in the second quarter, but market conditions should improve in the second half of 2007."

In 2006, CMOS image sensor sales totaled $4.2 billion, up more than 30 percent from about $3.2 billon in 2005, according to IC Insights. The current outlook for CMOS image sensors is for only 4 percent growth in 2007 to $3.4 billion, after a year-over-year decline in the first half of this year, according to the firm.

Falling revenues
Overall, worldwide revenues for image sensorsincluding both CCDs and CMOS image productsfell about 4 percent in the first six months of 2007, according to the firm.

"CCD sales have been down just slightly compared to the steeper drop in CMOS imagers, which have been clobbered with lower unit volumes and the erosion of average selling prices (ASPs) in the first two quarters this year," Lineback said. "Both CCD and CMOS image sensor segments are expected to improve in the Q3 and 4Q periods."

There is a bigger issue for CMOS image sensors: the sector is generally becoming mature, said Stephen Marlow, executive VP for Toshiba's U.S. chip unit, Toshiba America Electronics Components Inc.

"What is the penetration rate for cameras in cellphones? It's pretty saturated," he said. Still, Toshiba plans to expand its production of CMOS image sensors, as the company claims to have generated design wins at four of the top five cellular phone vendors.

Compounding the problem are some transitional issues in the market. "One major problem facing CMOS imager suppliers has been the slower-than-expected migration to higher resolution embedded cameras in handsets," IC Insights' Lineback said.

"VGA imagers continued to hold the largest share in camera phones through most of 2006, with 1.3Mpixel devices pulling even early this year," he said. "Our projection shows 1.3Mpixel CMOS imagers holding a 50 percent share in camera phones, but VGA will still account for about 35 percent of the sales. Persistently high unit volumes for VGA cameras phones have pushed down ASPs in the entire handset arena."

Slow growth
Other applications are growing slower than expected. The vast majority of digital still cameras still use CCD image sensors despite significant improvements being made in CMOS picture quality and device integration. "We don't see a crossover between CMOS and CCDs in digital still cameras until 2009," Lineback said.

"Therefore, CMOS image sensor makers continue to fight for new embedded camera applications in automotive, video security systems, Webcams in notebook PCs and medical applications," he said. "With digital still camera unit growth overall slowing from the torrid pace earlier this decadedue to market saturationthese other image sensor applications will be needed to maintain average CMOS-imager sale growth rates in the 16 percent CAGR range between 2006 and 2011."

Suppliers also face a cloudy future. Micron, for example, saw its CMOS image revenues hit $138 million in its last fiscal quarter, down 12 percent from the previous period and down 35 percent year-over-year.

"Micron continues to struggle with sensors and has not seen a rebound in orders from Motorola," said analyst Doug Freedman of American Technology Research Inc.

"We expect Micron to actively pursue strategic alternatives for its image sensor business," Freedman said. "While we don't expect Micron to exit the business entirely, we do believe the company is looking for ways to separate the image sensor results from its core NAND/DRAM business."

The other CMOS image sensor leaders are also suffering through weakness in the mobile camera phone segment. For example, OmniVision's sales sequentially fell 11 percent in its last reported fiscal quarter ended April 30, to $119.2 compared to $134.2 million in the prior three-month period.

OmniVision is scheduled to report quarterly results on Thursday. "We expect an upbeat quarter and guidance following surprising strength last quarter as the company ramps a new tier-one design win," Freedman said.

Moto design win
"We suspect OmniVision's design win is with Motorola," he said. "Based on ASPs and volumes needed to generate the incremental revenue in OmniVision's guidance for the July quarter, we believe the company could be designed into the new Motorola Razr2 handset, which has the potential to be a key platform for Motorola in the coming quarters based on early user/industry reviews."

Other CMOS image suppliers are seeing mixed results. "We believe pricing pressure in the low-end is still an issue with Samsung pushing for share gains," Freedman said.

Like Lineback, Freedman also sees a better picture in the second half for suppliers. "Handset unit growth remains robust," Freedman said. "2Mpixel sensors are becoming more mainstream with the industry moving from VGA straight to 2Mpixels. We believe 2Mpixel sensors carry a 2-to-3 times ASP advantage over VGA sensors and that advances in packaging technology will continue to push higher resolution sensors into mainstream phones and boost margins and volumes."

- Mark LaPedus
EE Times

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