Mobile phone cameras have enabled optical technology to grow rapidly

As mobile phones are becoming thinner and lighter, the thickness of the camera module has become an important factor restricting the thickness of mobile phones. The bulky mobile phone cameras in the era of feature phones are gradually being eliminated by the market. With the continuous evolution of technology, dual/multi-cameras are rapidly penetrating at this stage, bringing new growth to cameras.

Since the second quarter of 2019, the penetration of quad-cameras in flagship phones and triple-cameras in mid-to-low-end phones has accelerated. In 2020, quad-cameras in mid-to-high-end phones and triple-cameras in low-end phones are expected to become standard. Comparing the camera configurations of domestic smartphones in 2018 and 2019, it can be found that compared with 2018, the penetration rate of triple-cameras in 2019 has rapidly expanded from about 7% to more than 50%, and the market share of phones equipped with quad-cameras in the rear has also increased from 0 to about 15%.

According to the Global Smartphone Camera Supply and Demand Report by Sigmaintell, the global shipment of smartphone camera sensors in 2019 was about 4.7 billion, a year-on-year increase of about 15%. Thanks to the contributions of Huawei, Samsung, Xiaomi, and OPPO in leading the development of multi-cameras, the mid- and low-end sales of the main products have been equipped with quad-cameras. At the same time, with the increase in customization and large pixel demand, the sales of camera sensors are also increasing year by year.

Judging from the shipment volume of sensors, the global smartphone camera sensor supply chain is highly concentrated. In terms of regional distribution, mainland China accounts for about 30% and South Korea accounts for about 40%. Camera modules also increase in sync with the increase in sensors, and mainland China has a clear advantage in module manufacturing.

From the perspective of the mobile phone camera industry chain, it can be divided into upstream material and equipment providers, midstream camera module assembly plants, and downstream smartphone manufacturers.

Upstream raw material providers include: image sensors (CMOS), lenses, voice coil motors, filters, etc.; equipment providers include: SMT production lines, AOI inspection equipment, sapphire processing equipment, etc.

Image sensors (CMOS) are the most valuable part of the industry chain, accounting for about 50% of the cost, and the leading gross profit margin is around 45-50%; optical lenses account for about 20% of the cost, and the leading gross profit margin is about 70%; voice coil motors and filters account for less than 5% of the cost, and the leading manufacturers have a gross profit margin of more than 35%.

The competition landscape of the CIS chip industry presents a situation of three strong competitors. Japan's Sony, South Korea's Samsung, and China's OmniVision occupy the first echelon of the industry, and the three manufacturers control the main share of the CIS chip market. Hynix, GalaxyCore, ON Semiconductor, Panasonic, STM, SmartSens and other companies are in the second echelon. According to the latest report data from YOLE, the top three CIS chip manufacturers have a combined market share of 73%. Yole data shows that the CIS market was US$16-17 billion in 2019 and is expected to be close to US$23 billion by 2022. CIS packaging accounts for 20%, corresponding to an estimated market of US$4.6 billion in 2022.

The technical threshold in the field of mobile phone lenses is very high, and the gross profit margin of leading manufacturers is as high as 70%. Taiwan-based manufacturer Largan is the only one in the market, followed by Taiwan-based Yujing Optical and mainland-based Sunny Optical. South Korean lens manufacturers Samsung Electro-Mechanics, Diotech, Kolen, Sekonix, etc. are all independent and mainly supply Samsung and LG.

In the field of infrared filters, domestic manufacturers are in the lead. In 2018, the top three manufacturers in global market share were all domestic manufacturers, namely Crystal Optech, Wufang Optoelectronics and O-Film, with a combined market share of nearly 70%.

The manufacturers of voice coil motors are mainly from Japan, South Korea and China, with the leading manufacturers being Alps, TDK, Mitsumi and Jahwa. Representative domestic voice coil motor companies include Zhonglan, Sanmida, and Bilu. It is estimated that by 2020, the global production of mobile phone voice coil motors will reach 2.8 billion, and the domestic production will have increased to 1.68 billion, an increase of 186%.

The assembly process of mobile phone camera modules is complex. Camera modules are the core application field of smartphone optical applications and require the integration and packaging capabilities of lenses, filters, VCMs, camera chips and other components.

In the mobile phone camera module industry, OFILM, Sunny Optical Technology and Q Technology occupy the leading position in the industry. In June 2019, OFILM shipped 44.5KK pieces, accounting for 16.7% of the entire industry. Sunny Optical Technology shipped 43.2KK pieces, accounting for 16.2% of the entire industry. The top ten companies in terms of shipments account for 80% of the entire market.

Most first-tier manufacturers use COB production lines. COB stands for ChipOnBoard, which is the current mainstream electronic assembly technology. The assembly process mainly includes SMT, lens dispensing, photosensitive component cleaning, optical testing, etc.

Among them, SMT (surface mount technology) is a crucial link in the assembly process. It is an electronic assembly technology that places pinless or short-pin surface mount components on the surface of the PCB or the surface of its substrate, and assembles them by soldering or dip soldering. Specifically in the mobile phone camera industry, it is the most important link in the assembly process of mobile phone cameras, which is to attach and solder electronic components such as sensors and focus motors to the PCB.

The module packaging cost accounts for about 20%, but due to the relatively low technical threshold and relatively fierce competition, the gross profit margin is only about 10-12%.

The important equipment involved in mobile phone camera modules include: SMT machine (accurately placing surface mount components on PCB pads by moving the mounting head), reflow soldering machine (soldering components to PCB), AOI inspection (mainly used for assembly quality inspection and process quality control of components on PCB in electronic product production), and glue dispensing machine (to achieve the fitting of camera lens and lens holder).

In the field of electronic welding equipment, there are more than 40 domestic companies engaged in the manufacture of electronic product welding equipment, but most of them are concentrated in the mid- and low-end markets. In the field of AOI inspection equipment, the domestic market is almost monopolized by international manufacturers. In the field of placement machines, the market is currently dominated by foreign companies, and domestic companies are on the edge of the market and have not yet formed a competitive advantage.

 The penetration of multi-camera phones by domestic mainstream brands is accelerating. Judging from the total shipments of triple-camera phones, triple-camera phones are mainly concentrated in Samsung, Huawei, OPPO, vivo, Xiaomi, Apple, and other brands. According to Counterpoint data, Samsung currently has the highest penetration rate of triple-camera phones, reaching 27%; Huawei ranks second with 23%. From the overall data, the current penetration rate of triple-camera phones in the market is 15%, which will reach 35% by the end of 2020 and exceed 50% in 2021.

In the future, as the penetration rate of dual/multi-cameras further increases, their growth will be 2-3 times that of smartphones. From the perspective of product performance, there is still a lot of room for the current mobile phone cameras to play.

According to the forecast of Sigmaintell's camera sensor supply and demand model, there is a risk of imbalance in supply and demand for camera sensors in the first half of 2020, and component prices may rise. At the same time, with the introduction of various national policies, local governments are actively cooperating with local companies to increase the resumption rate of work. It is believed that with the rapid penetration of 5G, the global smartphone camera market will still maintain a rapid growth trend in 2020.