tech

Heavy pressure on CIS: I miss you very much in 2024

According to the financial report released by SMIC (Semiconductor Manufacturing International Corporation) for the fourth quarter of 2023, the image sensors and display driver chips used in mobile terminals have shown remarkable performance across SMIC's various product platforms. The revenue from smartphone image sensors (CIS) and ISP has increased by more than 60% quarter-on-quarter, with demand outstripping supply.

Research firm TechInsights' latest study also indicates that the global CIS market size experienced a slight growth in 2023, with total revenue exceeding 14 billion US dollars. In 2024, it seems that CIS is poised to return to its peak. Who is smiling?

01

Sony's Innate Advantage

Over the years, the competitive landscape of the CIS market has undergone significant changes. Sony has been a leader in the market, production, and technology. OmniVision and Samsung remain strong, while new players such as Galaxycore and Pixelplus are emerging. At the same time, the integrated device manufacturing (IDM) model has been a significant source of strength for Canon and Nikon, both of which have withstood the slowdown in the digital camera market. Additionally, there is Panasonic, which has established a joint venture with Tower Jazz to help it seek sales in high-end imaging applications.

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Today, the CIS industry is driven by mobile and automotive applications. Despite the intense competition in the large-capacity application of smartphone cameras, innovation in smartphone cameras will continue. To maintain competitiveness, CIS manufacturers are forced to integrate more and more features into mobile cameras.

According to Yole data, the global CIS market has grown from 13.9 billion US dollars in 2017 to 21.3 billion US dollars in 2022. The organization also predicts that the global CIS market size will increase to 28.8 billion US dollars by 2028, with a compound annual growth rate (CAGR) of 5.1% from 2022 to 2028. In its research report, CICC (China International Capital Corporation) points out that the CIS market structure is changing rapidly. In the second half of 2023, the demand for mobile phones is moderately recovering, the deinventory of the CIS industry is nearing its end, and the new product breakthroughs of domestic CIS manufacturers continue to exceed expectations. CICC believes that domestic CIS is flourishing in high, medium, and low-end series, and domestic mobile phone brands are gradually entering the era of full domestication of CIS chips. The new product volume in 2024 is expected to provide growth momentum for CIS manufacturers.

Furthermore, the growth of the automotive industry is driving the demand for automotive CIS, and the broad downstream application scenarios of machine vision are putting new performance demands on CIS products. Coupled with the stable and recovering expectations in the security field, in the non-mobile market, CIS may open up a high-growth space.

In 2023, Sony's performance in the image sensor market remains strong, with its market share continuing to lead, accounting for more than 55% of the market share. Sony has also, of course, seen the "big cake" of the automotive market.Sony's current goal is to challenge and surpass the market position of industry leader ON Semiconductor. Sony is currently leading the Japanese market. A report from Japan indicates that Sony Semiconductor Solutions Corporation anticipates a compound annual growth rate (CAGR) of 13% for the global automotive CIS (CMOS Image Sensor) market from 2022 to 2030. This highlights Sony's shift from the mobile phone market to the automotive market, as the demand for image sensors for safety and autonomous driving technologies in cars continues to increase.

Currently, the Tesla Model 3 is equipped with 8 cameras, while Sony's joint venture with Honda is planning to launch an electric vehicle, Afeela, equipped with more than 20 cameras. Research institutions expect the automotive CIS market to continue expanding, with the market size growing from $2.2 billion in 2022 to $3.7 billion by 2028.

Although ON Semiconductor currently dominates the market, Sony aims to capture 39% of the market share by the fiscal year 2025 (April 2025 to March 2026), a significant increase from the 9% share in the fiscal year 2021.

ON Semiconductor has taken note of Sony's ambitions and is not sitting idly by. Company executives visited Japan in late October to early November 2023 to conduct business discussions with automotive clients. ON Semiconductor has announced plans to start producing some CIS in Japan from 2024 to stabilize the supply chain, while also promoting the advantages of its "smart sensing" technology and HDR (High Dynamic Range) technology, as well as its LED flicker-free feature.

In demonstrations, ON Semiconductor compared cameras equipped with Sony image sensors to those using ON Semiconductor sensors, showcasing their smaller size and higher performance. ON Semiconductor claims it will not give up its leading position in the automotive CIS market.

02

Pressure on the CIS Market: The Wind Blows to Domestic Markets

In 2024, there is a strong demand for new high-end, large-format, and high-resolution smartphone image sensor products from high-end and ultra-high-end smartphones. Recently, according to supply chain news revealed by a Weibo digital blogger known as "Dingjiao Digital," Huawei P70 has increased its order by 50%, demanding a large stock of OmniVision CIS. Since the beginning of this year, OmniVision CIS has been in short supply, with all production lines running at full capacity, 24 hours a day. This favorable wind can also blow to domestic markets, which has a certain relationship with the previously mentioned Sony.

In 2023, the main reasons for the decline in profitability of Sony's semiconductor division were, first, a sharp decrease in image sensor orders from Huawei. Second, with a fixed production capacity, Sony's other major customer, Apple, had sufficient order volumes, making it difficult for Sony to significantly increase sales to other customers.

For Sony, while China is important, it is not yet given enough emphasis. Therefore, Sony has expanded the production capacity of its Nagasaki factory, with a long-term plan to increase sales to Chinese smartphone manufacturers. Xiaomi and OPPO are the two major targets that Sony is aiming for.Industry insiders have indicated that since the end of 2022, Sony and Samsung have gradually reduced their share of the Chinese market for certain CIS (CMOS Image Sensor) segments. This has created an opportunity for domestic companies to fill the gap and have their products tested in the market. "This is why, even though global demand for consumer electronics has not been strong in recent years, the impact on domestic manufacturers' orders has been minimal," they said.

According to an announcement by Hangzhou MediKai, in 2022, Toppan Chung Hsin and MediKai signed a "CIS Wafer Optical Path System Contract Manufacturing Agreement." MediKai provides processing services for color film (OCF) and microlens (ML) optical path systems on wafers provided by Toppan. The prospects for domestic substitution of the entire CIS optical path layer (PL, RGB, MICRO LENS) processing solution are broad, and MediKai is facing a good business opportunity.

As the pixel count of CIS increases and their size decreases, higher demands are placed on the packaging process. Particles larger than one pixel can cause dark spots in the image, significantly affecting image quality. The impact of large-sized particles on the entire imaging path of CIS is substantial. While other components in the CLCC packaging body have the conditions to achieve smaller pixel sizes, the packaging cover plate cannot achieve fine surface control due to the limitations of the preparation process, and it cannot ensure that the surface is free of large-sized particles.

With the penetration of intelligent driving functions such as ADAS and urban NOA, the quantity and price of automotive CIS are rising. According to Yole's forecast, by 2027, the number of cameras per vehicle could reach up to 20. As the core value of automotive camera modules, CIS accounts for about 50% of the total cost of automotive camera modules. Since the resolution level is closely related to the detection distance of the camera, for example, a 8-megapixel CIS can detect distances about three times further than a 1.2-megapixel camera, the market for higher resolution CIS is expected to grow significantly with the increasing demand for autonomous driving, both in terms of quantity and price.

In this market, ON Semiconductor and OmniVision are the largest global suppliers of automotive CIS. According to ICV Tank data, in 2022, the global automotive CIS market reached $2.6 billion, a year-on-year increase of 6.31%, with the Chinese automotive CIS market at $1.128 billion, accounting for more than 40% of the global market. Currently, the global automotive CIS market is dominated by ON Semiconductor and OmniVision, with market shares of 44.05% and 30% respectively in 2022, together accounting for more than 70% of the global market. In addition, traditional CIS giants like Samsung and Sony, as well as strong domestic manufacturers such as SmartSens, GCM, and BYD, have also entered the automotive CIS market. However, it is not easy to break into the automotive market. Data released by the Head Leopard Research Institute in April 2021 showed that the American company ON Semiconductor is the leader in the vehicle-mounted CIS industry, with a market share of 60%, holding an overwhelming position in the industry. OmniVision ranks second in the vehicle-mounted CIS market, with a market share in 2019 that was only about half of ON Semiconductor's. The customer verification cycle for chips used in automobiles is generally longer.

The main camera of smartphones is also a focus for domestic CIS manufacturers. Since the launch of the Xiaomi 14 series in October last year, it has shown a trend of becoming a "hit" product. According to activation data from some institutions, by December 24 last year, the activation volume of the Xiaomi 14 and Xiaomi 14 Pro models had already exceeded 2 million units. The main camera CIS of the Xiaomi 14 series has abandoned the Sony IMX800 used by the previous generation Xiaomi 13 and the Sony IMX989 used by the Xiaomi 13 Pro, and has switched to the "Light Hunter 900 (OVX9000)," which is a custom version of the OmniVision OV50H.

The OV50H is a 50-megapixel CIS released by OmniVision at CES 2023. It uses dual conversion gain technology (DCG) and has a pixel size of 1.2 microns and a 1/1.3-inch optical format, designed specifically for the rear cameras of high-end smartphones. The OV50H offers flagship-level low-light performance and autofocus performance, supporting 12.5-megapixel (120 frames per second) and high dynamic range (HDR) (60 frames per second), and is the first sensor in the OmniVision group to feature horizontal/vertical (H/V) four-phase detection (QPD) capabilities.

After the Xiaomi 14 debuted with the OV50H, the iQOO 12 series flagship phone released in November and the Honor Magic6 series released in January 2024 also featured the OV50H series CIS in their main cameras (Magic uses the OVH9000). Looking at the past iQOO digital series and Honor Magic series, the main camera has always used Sony CIS, but in the new flagship series models for 2023/2024, they have started to switch to using OmniVision's products.

At the same time, according to promotional materials that have been leaked, the upcoming Meizu 21 Pro's main camera sensor will also use the OV50H, while the main camera CIS of the previous generation Meizu 20 series chose the Samsung GN5, which had previously only appeared in vivo series phones.

In addition, there is news that OmniVision's latest OV50K sensor will be showcased on the upcoming Honor Magic6 RSR version. The OV50K competes with Sony LYT900, has a 1-inch optical format, and uses LOFIC (Lateral Overflow Integration Capacitor) technology, focusing on ultra-high dynamic range.