Driven by multiple factors, low-pixel CIS is still the "eye of the storm" of shortage and price increase

Under the impact of positive and negative factors, the mobile phone CIS chip market may show the following trends:

- The demand for ultra-low pixels continues to be hot;

- The demand for mobile phones can grow, which will definitely benefit the CIS market;

- However, at the same time, due to the increase in 5G costs, the growth of the CIS market due to multiple cameras will slow down;

- There are hidden dangers if the UK hastily "unseals the blockade".

Since the imaging function has been shining on mobile phones, this has become the main demand market for CIS chips. It can be said that various changes in the mobile phone market are likely to have an impact on the CIS chip industry chain that cannot be ignored. In 2020, the impact of the COVID-19 pandemic and Sino-US trade frictions on the entire consumer electronics market continued to ferment, and the mobile phone market was also inevitably affected, becoming two important factors that changed the development path of the CIS chip industry.

It is worth noting that these two factors are largely uncontrollable, so as the situation develops and changes, their impact will also change accordingly. In addition, factors such as the increase in 5G penetration and technological iteration will form an opposing force in the development of the CIS chip industry.

Jiwei Consulting believes that under the impact of positive and negative factors, the mobile phone CIS chip market may show the following trends:

1. The demand for ultra-low pixels continues to be hot

The spread of the epidemic in 2020 had a very direct impact on user consumption levels. The market demand for mid- and low-priced smartphones and feature phones increased significantly, thereby driving the shipment volume of mid- and low-resolution CIS chip products.

(Image and data source: Techno Systems Research, hereinafter referred to as "TSR")

The above figure is the statistics and forecast of the resolution trend of CIS chips used in the rear main cameras of mobile phones by Japanese research company TSR. It can be seen that in 2020, the shipment of 12-13MP CIS chips accounted for the highest proportion, which was 36.5%. According to its forecast, the market share of 12-13MP CIS will remain at 34% in 2021, and it will still be the most mainstream product on the market.

Jiwei Consulting believes that products with this resolution will become mainstream from 2020 to 2021, on the one hand, thanks to the fact that many iPhone models have been using 12-megapixel main cameras, and on the other hand, 13-megapixel main cameras have become standard in low-end Android models. In addition, the impact of the epidemic in some markets has led to a reduction in consumers' budgets for purchasing mobile phones, and the sales of low-end Android models are expected to increase.

In addition, the figure also shows that TSR believes that the market share of products below 3MP will remain above 20% from 2018 to 2023. TSR pointed out that this is mainly due to the strong demand for feature phones in 2021.

Jiwei Consulting also believes that the feature phone market in India and many Southeast Asian countries and regions has shown obvious vitality since the epidemic. Before the epidemic situation in these countries is significantly improved, users may tend to focus on feature phones and low-priced smartphones.

2. The popularity of 5G mobile phones is a "double-edged sword"

The negative impact of the epidemic on the overall sales of the mobile phone market is obvious to all, but the rapid popularization of 5G mobile phones has reduced the impact on the market to a certain extent.

According to TSR's forecast, although affected by factors such as Covid-19 and shortage of some parts in 2021, the growth rate is expected to be YoY+4.4% due to the improvement of economic activities and the expectation of replacement demand for 5G smartphones. In 2022, India and Southeast Asia will recover from the impact of Covid-19 and grow YoY+2.5%.

The growth in demand in the mobile phone market will inevitably benefit the CIS market. However, while promoting overall demand, the popularity of 5G mobile phones is also accompanied by an increase in terminal costs.

Jiwei Consulting pointed out that compared with 4G mobile phones, the cost of 5G mobile phones in innovative technologies such as processors, RF chips, images, screens and fast charging has increased. The processor is the most expensive, and the camera is second only to the processor. In order to balance the cost increase caused by the use of 5G accessories, many terminal brands have cut the cost of the camera component.

(Image and data source: TSR)

According to TSR's forecast, the rate of multi-cameras in smartphones will reach 84.9% in 2020 and will increase to 92.1% in 2021, with triple-cameras accounting for an increasingly higher proportion. In 2020, the rate of triple-cameras was 33.1%, and in 2021, this figure increased to 45%. On the contrary, the rate of quad-cameras in 2021 dropped from 25.2% last year to 23.8%.

Jiwei Consulting said that although quad-cameras have long been used in Android brand phones, their popularity is far slower than that of dual-cameras and triple-cameras, and they are basically only used in high-end flagship series. At present, the popularity of quad-cameras may be further limited by the increase in 5G costs. This also means that the growth of the mobile phone CIS market due to multiple cameras will slow down.

At the same time, CIS chips account for the highest proportion of camera costs and have become a key point for brands to control costs. In addition to reducing usage, terminal brands have also slowed down the improvement of camera pixels.

(Image and data source: TSR)

Currently, the CIS chips in the 40-50MP stage on the market are mainly 48MP, and the 60-64MP stage are mainly 64MP. It is obvious from the data that the market demand for 48MP and 64MP CIS chips will continue to grow from 2020 to 2025. And in the next few years, 48MP will replace 12-13MP and become the most mainstream product.

Jiwei Consulting believes that this is primarily due to cost constraints. On the one hand, the terminal market continues to upgrade the pixel of flagship phones (the demand for CIS above 108MP is increasing) as a competitive advantage in the high-end market; on the other hand, 48MP and 64MP products are being adopted in a larger area on mid-range models with a high market share.

TSR also mentioned in the report: 48MP is becoming cheaper, mainly due to the product upgrade of CIS chips. The price of 0.8μm-48MP chips is already below US$4, and the mass production of 0.6μm-48MP chips will further reduce the price of the former, narrowing the price gap with 12-13MP, thus replacing some 13MP products. Similarly, 64MP products are also being adopted more as prices fall.

Jiwei Consulting learned from the industry that since the beginning of this year, in order to reduce costs, terminal brands have not had strong demand for high-pixel CIS chips. The prices of products mainly based on 48MP and 64MP have basically dropped to varying degrees. In contrast, the prices of low-pixel CIS chips have increased significantly compared with last year.

What needs attention is that although the impact of the epidemic on the industrial chain and the market has improved, it has not stopped.

3. Hidden dangers of Britain’s hasty “unblocking”

In fact, in the post-epidemic era, the direct impact on the industrial chain has been greatly improved. In addition, vaccines have begun to be popularized in many countries and regions around the world, and the market has even gradually shown signs of recovery. However, the United Kingdom, as one of the countries with the highest incidence of the epidemic in the world, officially lifted its lockdown on July 19.

Virologists at the University of Leicester warned: "Fully open entertainment venues are the perfect environment for the spread of the virus and may even create new super strains." This shows that the British government's unblocking without considering the consequences poses serious hidden dangers to countries and regions around the world.

Once the epidemic worsens, many countries may implement blockades to a certain extent to prevent and control the epidemic, and the resulting chain reaction will be repeated, and the above-mentioned recovery trend of the mobile phone market will also be blocked. If the demand in the mobile phone market cannot recover, the overall demand in the CIS chip market will undoubtedly be weakened.