OmniVision Technologies (OVTI) manufactures a wide array of products from image sensors for smartphones and tablets and other smart devices. Going forward, it has huge potential, as customers prefer smartphones with cameras more than stand-alone cameras. It has been seen that smartphones with cameras have a 13:1 lead over stand-alone cameras. Let's see in detail how the industry is performing and where OmniVision stands.
According to International Data Corporation (IDC), smartphone sales are expected to grow 40% year over year, i.e. around 1 billion units this year. And by 2017, total smartphone shipments are expected to reach around 1.7 billion. According to statistics, the global market for smart devices was estimated to be around $622.4 billion in 2013. Out of this, it is estimated that around $423.1 billion came from the sale of entry-level and mid-range smartphones and tablets, which have a price tag under $300 to $ 500.
It is an era of cutthroat competition and with $200 phones driving the future smartphone industry, vendors have to cut down their costs to remain competitive. Also, there are giant players in this space such as Sony and Samsung.
In the last five years there has been considerable growth in the global CMOS (complementary metal oxide semiconductor) image sensors industry. It is anticipated that its revenue would reach around $7.7 billion by 2017 at a CAGR of 5.1%. CMOS sensors find application in smartphones, tablets and other devices where embedded cameras are used.
We have seen how the industry as a whole has been performing; now we will consider OmniVision’s standalone performance. OmniVision was Apple’s key supplier until Sony started supplying camera sensors to Cupertino from the iPhone 4S onward. Since then OmniVision has diversified its business, which proved to be a success. As a result of this diversification its revenue has been growing consistently.
While talking about competition, pricing of a product plays a decisive role. In this regard, OmniVision has an edge over its peers. The average selling price of OmniVision’s camera sensors is $1.79. This is the decisive factor because a company selling a $200 device won’t opt for expensive camera sensors, which may cost up to $7.3. Such expensive camera sensors are manufactured by Sony, while Samsung's sensors cost around $1.93.
The company had been performing quite well in the past, and its results inidicate the same growth momentum. OmniVision has seen good demand for its 8 megapixel and 12 megapixel sensors from Asian markets.
Moreover, OmniVision has various other products under its sleeve, which could provide the necessary boost for the company. It has developed a CameraCube chip technology for low resolution cameras, which may be a great opportunity for the company in the future. Such sensors are used in front-facing camera in smart devices.
Apart from the mobiles, the automobile industry has also started using cameras for rear view, which is again a great opportunity for the company. OmniVision has already gained significant market share with OEMs in Europe and the U.S. Going forward this could help the company to increase its market share in the automobile market. According to company data, currently OmniVision has 23% of the market share in this segment, and it expects this share to increase further.
OmniVision has to face tough competition in the Chinese market. It is estimated that in the coming years China and India will lead the smartphone boom in Asia. As a result, all smartphone companies would try their level best to get a major portion of this market. As these are emerging economies, low and mid-range phones will be the major growth drivers. Since OmniVision manufactures sensors at a comparatively lower cost, its prospects seem good.
This would also lead to strong demand for smartphones and tablets in this region. But OmniVision has to face tough competition from SK Hynix, which is focusing on the Chinese market for CMOS sensors and has already started promotions to lure customers.
OmniVision must also keep an eye on the progress that Samsung is making with its camera sensors for the mass market. Samsung has already created its mark in CMOS sensor production.
Consequently, it has already bagged an order for producing 80 million to 90 million sensors. It would also focus on the low end of the market, i.e. it might produce cheaper products and enter into OmniVision’s space.
Along with Samsung, Sony is yet another threat to OmniVision. Sony has already bagged the Apple order and is seeing significant demand for image sensors. It has invested around 220 billion yen since 2010 to boost production capacity, which clearly shows its commitment to maintain its lead in image sensors.
OmniVision has improved its revenue at a good pace, and the growth momentum seems to continue. Cost advantage is an edge it has over its peers. With the help of its low-cost sensors, the company could bag orders for low-cost smartphones.