Mobile Imaging Report from China

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China Galaxy International publishes it analysis on mobile imaging industry in China.

"Currently, Sony dominates the smartphone CMOS image sensor market with over a 35% market share in 2016, followed by Samsung with a 19% market share and Omnivision with a 12% market share.

The lens market is dominated by Largan Precision [3008.TT], Sunny Optical [2382.HK] and Genius Electronic Optical [3406.TT]. The total market share of these three companies was 53.3% in 2015. Currently, most smartphone cameras are equipped with 6P lenses. Only Largan Precision can achieve a decent defect-free rate (over 70%) and has enough capacity to meet demand.

The percentage of VCMs used in smartphones increased from 62.4% in 2013 to 76.6% in 2016. The VCM market is dominated by Japanese and Korean companies, which have an aggregate 60%-70% market share. VCM can also be used in many other areas, such as VR/AR, drones and medical equipment.

The five largest single-cameras module providers are Sunny Optical, O-Film Tech [002456.SZ], Hon Hai Precision [2354.TT], Cowelle Holdings [1415.HK] and Samsung Electro-Mechanics, which have a market share of 8.9%, 8.7%. 5%, 4.7% and 4.5%, respectively. The dual-camera module market is dominated by three companies: LG, Sunny Optical and O-Film Tech, which have an approximate aggregate market share of 83%. We believe there is large potential for domestic dual-camera module manufacturers to grow since the dual-camera design is getting more and more popular, and the gross margin is of dual-cameras is about 2% higher than that of single-camera modules.

The major trends have been identified:

"From Single- to Dual-Camera: The dual-camera trend is now well-established in the smartphone industry, and dual-cameras can capture sharper images with more details than single-cameras can. Over 19 dual-camera equipped smartphones were released last year and 14 new dual-camera smartphones were introduced in the first four months of this year. The penetration rate of dual-cameras was only 5.6% in 2016, but it is expected to reach 15% this year, according to Sunrise Big Data. Generally, there four types of dual-cameras: a) Bayer + Mono (Huawei P9); b) wide + tele (iPhone 7 Plus); c) symmetrical (Huawei Honor 6 Plus); and d) asymmetrical (Xiaomi Redmi Pro).

At the current stage, 3D cameras on smartphones are used mostly in static conditions (e.g. facial recognition) and do not require a high frame rate, so structured light is the better choice for smartphone manufacturers. The cost of a structured light equipment is approximately US$20. The projector accounts about 50% of the total cost, or about US$10, algorithm chips cost US$4-$6, or 25%-30%, and receivers cost US$5-$6, or 20%-30%. Apple Inc. [AAPL.US] acquired PrimeSense, a 3D sensor company, for US$350m-$360m in 2013. PrimeSense is one of the major structured light players, and it provided research and related support for the development of Microsoft’s Kinect. As a result, we believe there is a strong possibility the new iPhone will use structured light, and Android smartphone companies will closely follow this trend. In Q4 2016, 432m smartphones were sold globally, of which 352m ran Android (81.7%) and 77m ran iOS (17.9%). We believe the increasing application of 3D sensing technology in Android smartphones will further boost the growth of the 3D camera industry.

360 degree fisheye panoramic camera: Huawei cooperated with Insta360 to announce the Honor VR 360-degree camera in February 2017, which allows users to take high-resolution 360-degree videos and photos. The VR camera has two 210-degree fisheye cameras, offering a seamless livestreaming experience. ProTruly [600074.CH], which is a lesser-known brand in China, presented the world’s first VR smartphone at Mobile World Congress 2017.

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