September 15, 2009 / 4:49 PM / 8 years ago

iPod or netbook, cameras click for new image sensors

<p>The new iPod nano, featuring a variety colors and a video camera, is shown at an Apple Inc special in San Francisco, California September 9, 2009.Robert Galbraith</p>

BANGALORE (Reuters) - As charismatic Apple Inc (AAPL.O) CEO Steve Jobs' much-hyped public appearance last week was drawing to a close, he uttered his signature line "one more thing" and visuals of a video camera-equipped iPod nano burst onto the giant screen behind him.

Around the same time, shares of chipmaker OmniVision Technologies Inc OVTI.O were hovering around their year-high in anticipation of a camera-embedded iPod touch powered by the company's CMOS image sensors.

An OmniVision official had refused to discuss client-wins with Reuters last week, but acknowledged that CMOS, the low-cost image-sensing technology that made camera phones cheaper, is now fast expanding to other devices.

As cameras become omnipresent in devices across industries, the need for an inexpensive and power-saving technology is driving the market for CMOS image sensors.

"There is a tremendous upside to grow into emerging markets such as notebooks, gaming, digital-still-camera, automobile, security and medical," said Bruce Weyer, vice president, marketing, at OmniVision.

OmniVision shares eventually closed down 1 percent on September 9, the day Jobs made his appearance at a company event in San Francisco, as the new iPod touch came sans camera, but the launch of the video-enabled iPod nano provided some solace.

"Our checks indicate the new iPod nano will feature an OmniVision VGA sensor (a low-resolution CMOS sensor)," Robert W. Baird analyst Tristan Gerra wrote in a note dated September 9.

He expects the average selling price for this chip at 20 cents, compared with an estimate of $1.50-$1.60 for a 2 megapixel sensor in the iPod touch.

Apart from pure-play CMOS vendors OmniVision and Aptina Imaging Corp, companies such as Toshiba (6502.T), Samsung Electronics (005930.KS), Sharp (6753.T) and STMicroelectronics (STM.PA) also dabble in the market.

Image sensors convert optical images to electric signals. The two competing technologies in the market are CMOS (complementary metal-oxide-semiconductor) and CCD (charge coupled device).

CCD, used mainly in digital still cameras and industrial applications, is known for its high-quality and low-noise images and tends to be more expensive.

The expansion of CMOS has eaten into CCD's market share. The CCD market shrank by 7.1 percent in 2008, while CMOS grew by 5.2 percent, according to technology research firm Gartner.

CMOS will see more use in traditional CCD strongholds such as industrial, automotive and medical applications in the next five years, Gartner analyst Hiroyuki Shimizu wrote in a note in July.


OmniVision has seen its revenue share from non-mobile devices rise consistently, from 20 percent in 2007 to 35 percent in 2009. The segment contributed 45 percent in the first quarter, primarily driven by notebooks and netbooks.

Gartner estimates that by 2013, over 60 percent of notebooks used at home and 40 percent of those used at work will be camera-enabled. For home-based and work-based netbooks, this will be more than 90 percent and 80 percent, respectively.

In the automotive market, CMOS vendors are expected to benefit from a 2008 U.S. law that will require new vehicles by 2013 to be equipped with cameras that show what is behind.

CMOS is also preferred in lane departure warnings, sign detection and blind spot detection, as it can be packaged as a system-on-chip, as opposed to CCDs, which are multiple chip solutions, said OmniVision's Inayat Khajasha.

The automobile market is always slow to develop, said Canaccord Adams' Robert Burleson. "But once you have design wins, they tend to last longer," he said. "So it could be a key source of margin support and differentiation going forward."

In medical applications, soaring demand for disposable surgical cameras is a key factor driving the market for CMOS image sensors.


However, things are not completely hunky-dory for CMOS sensors. As they are not able to match image clarity offered by CCD sensors, the onus is on vendors to work on that key area to sustain the growth rate.

"Consumers want flexibility in a wide range of shooting conditions... Consumers really desire reduced noise in images taken in dark places," wrote Gartner's Shimizu.

OmniVision said it recently launched a chip aimed at exceeding the CCD image quality, and has been focusing on technologies that enable low-light sensitivity.

"In still photo, you can use a flash," Weyer said. "You cannot do that for streaming video, so low-light sensitivity is extremely important." He added that mobile phones would be more video-centric going forward.

For at least the next two years, cellphones -- which have evolved into mobile Internet devices from smartphones -- would continue to drive the CMOS market, analysts say.

"Automotive is going to be an avenue of growth. But still, for the next couple of years, I think cellphone is going to be what matters the most for companies like OmniVision or Aptina," said Robert W. Baird's Gerra.

Additional reporting by Shrutika Verma, Editing by Saumyadeb Chakrabarty

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