AI empowers automotive optics: automotive cameras/lidar/AR-HUD embrace rapid development opportunities

To join the " Smart Car Experts Autonomous Driving Industry Exchange Group", please add 18512119620 (same as WeChat), and note company-name-position to join the group

High-end intelligent driving is accelerating its penetration, and the market demand for automotive optical components continues to rise

The use of high-end intelligent driving has significantly increased the use of optical sensors per vehicle. Compared with low-end intelligent driving models, high-end intelligent driving models deal with more complex scenarios and require higher data volume support in order to increase the speed of response, thereby increasing the configuration requirements for core optical sensors such as vehicle cameras, lidars, and AR-HUDs. According to Yole statistics, L3-level intelligent driving models require at least 1 lidar and 7 vehicle cameras, and L5-level intelligent driving models require 4-6 lidars and 15 cameras.

Compared with traditional HUD, AR-HUD can provide more intuitive driving information display. In order to enhance the driver's perception of the surrounding environment and assist him to take over the vehicle when necessary, L3-L4 is usually equipped with 1 AR-HUD. The use of optical sensors in high-end intelligent driving models has increased significantly, and the automotive optical industry chain is expected to fully benefit from the increase in the penetration rate of high-end intelligent driving and open up long-term growth space.

The penetration of high-end intelligent driving models is accelerating. According to ICV statistics, technological iterations and increased consumer acceptance continue to drive the penetration rate of L2 and above models to rise steadily. The penetration rate of L2 autonomous driving passenger cars is expected to exceed 50% in 2025. It is expected that by 2027, the penetration rate of L3 will reach 25%, and the penetration rate of L4/L5 will reach 3%. Despite the uncertainty of the growth rate of the auto market, NOA high-end intelligent driving still maintains a high growth trend.

In 2023, the shipment of passenger cars that achieve NOA in the Chinese market will reach 945,000, and the proportion of urban NOA will be 25.2%. It is expected that by 2025, the shipment of models supporting NOA will increase to 3 million, of which the proportion of urban NOA will exceed 65%. At present, mainstream car companies have successively entered the stage of large-scale competition for urban NOA. At the same time, the promotion of L3/L4 autonomous driving cars has also received policy support. It is expected that the intelligent driving industry will accelerate its development in the future, and L2 and above models are expected to occupy a dominant position in the market. Urban NOA, as an important application scenario for high-level intelligent driving, will gradually become mainstream.

The accelerated penetration of high-end intelligent driving drives the increase in demand for automotive optical components, and LiDAR and AR-HUD are facing opportunities for rapid development. According to statistics from Chaodian Think Tank, the global shipment of automotive camera lenses will be 260 million in 2023, and it is expected that the shipment will reach 340 million and 420 million in the next two years. The markets for automotive LiDAR and AR-HUD are also growing rapidly. According to Yole's research and estimates, the global market for automotive LiDAR is expected to reach US$3.632 billion in 2029, with a CAGR of 38% from 2023 to 2029. The global market size of AR-HUD in 2023 is US$1.27 billion, and it is expected to reach US$4.56 billion in 2030, with a compound growth rate of 24%. As the world's largest automobile market, China's rapid penetration in the field of high-end intelligent driving will bring important opportunities for domestic companies.

In the next few years, automotive optical components, especially LiDAR and AR-HUD, will gradually expand from high-end models to the mainstream market, pushing the entire industry into a stage of rapid development. Domestic manufacturers are expected to achieve leapfrog development with the support of domestic substitution opportunities. Although the industry chain is under great pressure to reduce prices this year, automotive intelligence is still in a stage of rapid development, driving the penetration rate of diversified sensors such as high-end cameras, LiDAR, millimeter-wave radar, and smart cockpit equipment such as AR-HUD. It is recommended to pay attention to the automotive optical industry chain manufacturers with faster performance growth, such as Sunny Optical Technology, Gowell Electronics, Crystal Optech, and Will Semiconductor.

In terms of products, the future growth trend of vehicle-mounted cameras is good. According to third-party data, the global camera quantity growth rate is expected to be 12.6% in the next few years, and the proportion of ADAS products continues to increase. The vehicle-mounted laser radar and AR-HUD markets are in a state of rapid growth, and the market growth rate is higher than that of vehicle-mounted cameras.

Apple's camera innovation will help the localization penetration rate of its supply chain increase

Last year, Apple's 15 mobile phone series adopted a periscope lens for the first time, and the Android periscope lens market has reached a climax again after turning weak. Single prism, single periscope, four reflections - the iPhone 15 Pro Max sensor is "lying flat" at the bottom of the fuselage, while the sensors of the Android camp are usually placed vertically, and the flat-lying sensors have smaller area restrictions. In addition, this model uses a "3D sensor displacement optical image stabilization and autofocus module", which can be displaced in the three directions of X, Y, and Z axes to achieve anti-shake. This module and structure are also used in periscope lenses for the first time.

From single-module to dual-module, the periscope lens sinking to low-end models and the pixel upgrade are the three major directions for Apple's future camera updates. According to current industry information, some of Apple's next four generations of models are expected to use glass prisms. In the second half of 2024, the iPhone 16 series, both the Pro and Pro Max models will use quadruple reflection prism cameras (with the same specifications as the iPhone 15 Pro Max); the high-end iPhone 17 model is expected to be equipped with an upgraded quadruple reflection prism camera. It is not yet certain whether only the iPhone 17 Pro Max is equipped with an upgraded quadruple reflection prism camera. If so, the 2026 iPhone 18 Pro will also be equipped with an upgraded quadruple reflection prism camera; the quadruple reflection prism camera will once again usher in a significant upgrade in specifications on the new iPhone 19 in 2027, with a higher upgrade than the iPhone 17 and iPhone 18. It is expected that the quadruple reflection prism camera of the new iPhone in 2027 will support a higher optical zoom ratio.

2.1. The rise of periscope cameras has benefited a large number of domestic optical suppliers

The stock prices of optical suppliers have been rising, and some manufacturers have benefited significantly. Largan (the exclusive supplier of telephoto lenses for iPhone 15 Pro Max), Crystal Optech and Lantech (the first and second suppliers of prisms for Apple's periscope telephoto, respectively) are the biggest winners of the iPhone 15 Pro Max telephoto upgrade. It has become an established fact that the Android camp has followed Apple in actively applying periscope lenses. According to Ming-qi Kuo's investigation report and the current industry information, Largan, Crystal Optech, Sunny Optical Technology, Lantech, and O-Film will all become major beneficiaries. The upstream and midstream of the periscope camera supply chain include prisms, lenses, CIS, and VCM respectively; module packaging, and equipment manufacturers. The competition landscape of each sector is as follows:

1) Microprism: Crystal-Optech is Apple's largest supplier of microprisms. The iPhone 16 series has been upgraded to the Pro model, and the periscope specifications are expected to be further upgraded. The quadruple reflection prism business will contribute steady performance growth in the next two years; Lantech Optics' research and development projects include triple-bonded high-refractive index material microprism research and development projects and high-magnification optical zoom mobile phone cameras. The company has invested 850 million yuan in the microprism industry base as of June 2024.

2) Lens: Glass-plastic hybrid lenses are accelerating their landing. Glass lenses have lower thickness, better optical performance, better deformation resistance, and can better play the technical advantages of sensors. This is one of the main reasons why Apple's iPhone 15 Pro Max telephoto adopts Largan glass-plastic hybrid lenses. Currently, Largan and Sunny Optical Technology are the leading manufacturers in the field of glass-plastic hybrid lenses. Largan has entered Apple's new product supply chain, focusing on peripheral boards and UBB continues to send samples. The management maintains the previous expansion plan, completes the setup in the third quarter and starts production in the fourth quarter. The capacity utilization rate in the fourth quarter is expected to reach full load; Sunny Optical Technology has achieved mass production of multiple one-inch glass-plastic hybrid main camera mobile phone lenses, and the research and development of multiple multi-group periscope mobile phone lenses has been completed.

3) CIS: CMOS image sensor, which has little difference from the CIS requirements of ordinary lenses. Since the prism in the periscope lens will cause a certain degree of attenuation of light intensity, the sensor size requirements are higher. According to TechInsights research data, in the global smartphone CIS market size of US$14 billion in 2023, Sony will occupy more than 55% of the market, becoming the biggest winner in the global smartphone CIS market. Samsung will occupy more than 20% of the market, and OmniVision will rank third with a share of about 7%. Sony's new CIS production line in Thailand is expanding production, but due to the limited production capacity and yield of its own wafer fab, it has turned to cooperation with TSMC; Japan's Toppan Group (Toppan) has moved its CIS production line to Shanghai;

At the end of 2023, GalaxyCore held a production ceremony in Lingang, Shanghai, announcing GalaxyCore's transformation from Fabless to Fablite. Fablite's more flexible business model helps the company to achieve resource integration and process development at the chip design and manufacturing ends. The expansion of CIS production by major manufacturers reflects the recovery of downstream demand. Starting from the end of 2022, Sony and Samsung gradually reduced some of their CIS shares in the Chinese market. This part of the market share given up is a good opportunity for domestic companies to make up for the gap and accept market testing for their products. Under the great wave of domestic substitution, local leading CIS manufacturers represented by OmniVision, STMicroelectronics, and GalaxyCore have many advantages, and the technology gap is narrowing.

4) VCM motor: Japanese and Korean manufacturers dominate, and Chinese manufacturers are rising. Major global VCM manufacturers such as ALPS, Mitsumi, TDK, and Samsung Electronics occupy most of the market share. Currently, VCMs for periscope lenses are mainly provided by Mitsumi and TDK. Chinese manufacturers such as New Thinking, Zhonglan, and Haoze Electronics are also accelerating their rise and have entered the supply chains of Huawei, Xiaomi, OPPO, vivo and other manufacturers.

5) Module packaging: From a global perspective, camera module manufacturers are mainly concentrated in Japan, South Korea, mainland China and other regions, and Chinese corporate smartphone module manufacturers have a leading position in the world. Among them, Sunny Optical, Q Technology, and O-Film are in the first echelon, and Sanyingxing, Shengtai, Tongxingda, Tonly International, and Chenrui Optics form the second echelon. According to the data of Chaodian Think Tank in March 2024, Sunny Optical Technology, Q Technology and O-Film ranked in the top three. Among them, Sunny Optical Technology ranked first with 41.9KK shipments, Q Technology ranked second with 36.85KK shipments, and O-Film ranked third. In March 2024, the shipments of mobile phone camera modules were 31.6KK, and the top ten mobile phone camera module manufacturers shipped 214 million units, a significant year-on-year increase of 20%. Affected by the recovery of the consumer electronics market, China's smartphone market will continue the rebound momentum at the end of 2023, and the market performance is higher than expected, and the overall growth of the market remains optimistic.

The domestic manufacturer Gaowei Electronics' rear camera share is expected to increase rapidly, opening up several times of performance growth space. The company previously used iPhone as the main supplier of front camera modules for iPhone and iPad. The market space for iPhone rear cameras is about 8 times that of front cameras, and the innovation of rear cameras in the next few years will drive the market to continue to grow. We expect the company to enter the periscope and ultra-wide-angle module numbers of the new iPhone rear camera in the second half of this year, and the company's revenue is expected to increase by several hundred million US dollars; in the next two to three years, it is expected that the continuous innovation and iteration of rear cameras will drive the module ASP to increase, and the increase in its own share will bring significant performance growth to the company.

6) Filters: Domestic manufacturer Crystal Optech is expected to benefit from increased market share. The localization of filter coating for major North American customers has a large market space. The company has obtained the opportunity to cooperate directly with major customers this year, achieving breakthroughs in the supply chain and providing customers with competitive solutions. The growth space is worth looking forward to.

7) Equipment manufacturers: The special demand for periscope lenses has spawned a group of suppliers focusing on equipment testing and assembly equipment, including Saiteng Co., Ltd., Core Technology, Bozhong Precision, Zhilifang, etc. Among them, Saiteng Co., Ltd. has newly entered Apple's supply chain as a core equipment testing/assembly equipment supplier, and exclusively supplies Apple's periscope lens inspection orders, supplying Apple's MR's higher-value component equipment; Core Technology is a leading supplier of whole machine inspection equipment in the mobile terminal industry, providing brand customers with various types of camera inspection equipment, and has the most complete whole machine inspection solution in the industry; Bozhong Precision's equipment can be used in the whole machine assembly and testing of terminals, as well as the assembly, inspection, measurement, and testing of front-end components and module segments, such as camera modules.

AI and intelligent upgrades open up new space for XR devices and mobile phone cameras

3.1. AI+AR glasses have broad potential, and software and hardware are upgraded

Display technologies are flourishing, and creating an immersive experience is an important development direction for AR glasses: 1) In terms of display technology, reflective waveguide and diffraction waveguide technologies coexist and develop. Reflective waveguide products are thin and light, with clear imaging and good color uniformity, but they also have technical pain points such as high difficulty in mass production and automation; diffraction waveguides are less difficult and less expensive to mass produce, and although they have problems such as color uniformity and low energy utilization, they are currently the mainstream development technology in the market.

2) In terms of interactive technology, the improvement of gesture, eye and voice recognition technology enables users to interact with the virtual world in a natural way, which enhances the intuitiveness and convenience of interaction. AR glasses manufacturers represented by Sony and Microsoft aim to enable users to experience the virtual world immersively and have proposed a number of research and development patents. 3) On the AR chip side, with the upgrade of virtual content, the performance, power consumption, image processing capabilities, integration and edge computing capabilities of AR chips are being improved. 3D chip technology has become the key to the breakthrough of AR prototype chips, and huge performance improvements can be achieved through wafer-to-wafer bonding technology.

AI drives the innovation and upgrade of mobile phone optics, and the technology upgrade of the mobile phone camera industry chain continues. In 2024, major mobile terminal manufacturers will focus on the development of AI mobile phones. Compared with ordinary smartphones, AI mobile phones, empowered by large models and higher computing power chips, will achieve higher-dimensional intelligence in shooting, calling, reading and other aspects. AI drives mobile phone cameras to gradually develop in the direction of smart sensors that integrate perception, understanding and analysis. Taking the Galaxy S24 Ultra launched by Samsung as an example, it is equipped with the highest 200-megapixel camera in Samsung mobile phones and the most powerful four-telephoto system in Samsung mobile phones to date. It is equipped with AI algorithms to intelligently identify scenes and adjust parameters, coordinate various cameras to produce the best photographic effects, and upgrade through Super HDR to feedback the effects to users in real time, with better imaging effects and user experience, guiding the subsequent trend of mobile phone camera optics upgrades.

1) Optical hardware upgrades to capture high-quality raw images: High-quality raw data helps AI process images; 2) Mobile phone CIS collects more spectral information: AI target recognition requires additional spectral information to achieve intelligent recognition of scenes and images; 3) Mobile phone CIS has faster processing speed and lower power consumption: AI processing requires CIS to quickly capture and transmit large amounts of data to the processor.

AI+AR has a broad imagination space, and AR functions continue to upgrade: AI technology can enable smart glasses to achieve more natural interactions, provide more accurate services through outdoor multimodal large models, and provide more humane services such as highly responsive smart assistants through large models. AI functions have higher requirements for advanced chips. NPU is responsible for a variety of sensor inputs, such as visual, auditory, and tactile sensors, as well as various position and motion sensors to ensure that various types of data inputs can be processed. Using AI's image and data processing and analysis capabilities, users can receive information in real time, improve production efficiency and safety work quality. Currently, AR glasses have been used in a variety of industrial scenarios, including medical, logistics, and production workshops. With the accelerated iteration of software and hardware technologies, it is expected to extend to more enterprise-level application scenarios.

Meta continues to upgrade its AI+AR glasses. In October 2023, Meta's first AR glasses equipped with Meta AI, Ray-Ban Meta, were released. Users interact with the glasses through voice, and AI can support daily conversations and ask basic information such as weather and events. Through the camera on the glasses, first-person perspective live broadcasts on platforms such as Instagram and Facebook are supported. According to Meta, the shipment volume of this pair of glasses reached 360,000 units in Q4 2023. According to The Verge, Snap and Meta will both release new AR glasses in September 2024. Meta's new glasses can project colorful and realistic holograms into the user's view, achieving a seamless fusion of digital and reality. We look forward to AI empowering AR glasses content in the future, and more rich virtual content ecosystems being developed.

The development of AI mobile phones has led to an increase in the proportion of mid- to high-end models, and the overall market for mobile phone cameras is expected to increase both in volume and price. Due to cost constraints, low-end models will find it difficult to meet the hardware configuration requirements of AI mobile phones in a short period of time. In the short term, large AI models will be mainly installed on high-end mobile phone models, and high-end product lines are expected to benefit first. Compared with mid- and low-end models, high-end mobile phones have more single-machine capacity and higher camera configurations. Taking Honor models as an example, the number of cameras for high-end models and low-end models are 5 and 3 respectively, and the camera pixels and performance of high-end models are far superior to those of low-end models. The mobile phone camera market is expected to fully benefit from the accelerated penetration of AI mobile phones to achieve increases in both volume and price. According to Omdia's forecast, the market penetration rate of AI mobile phones is expected to reach 47% in 2028. (Source: Soochow Securities Research Institute)

Due to limited space, to be continued ...

TEL ｜ 18512119620

E-mail｜ icv@enmore.com