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OmniVision Technologies: Smartphones Are Catalysts for This Stock

July 22, 2014 | About:
sandyinvestment

sandyinvestment

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Omnivision Technologies (OVTI) produces image sensors for smartphones, tablets and other smart devices. The very certainty that camera smartphones have a 13:1 lead over stand alone cameras means that Omnivision operates in a huge industry. How about we investigate the industry landscape and how Omnivision is positioned.

The industry's landscape

As per IDC, overall smartphone shipments are forecast to develop 40% year over year to more than 1 billion units this year. All out smartphone shipments are forecast to achieve 1.7 billion units in 2017.

With sub-$200 phones driving the fate of smartphone sales, it is imperative that the bill of materials will must be cut around vendors so as to stay aggressive in the smartphone market. Alternate players in the smartphone Polaroid sensors business sector are Sony (SNE) and Samsung.

The worldwide CMOS (reciprocal metal oxide semiconductor) image sensors industry has witnessed strong development amid the last five years. The industry's revenue is forecast to arrive at about $7.7 billion in 2017 at a CAGR of 5.1% in excess of five years (2012-2017). CMOS sensors discover use in smartphones, tablets and different devices where installed cameras are used.

Where Omnivision stands?

Omnivision was a key supplier to Apple, yet has been diversifying since Sony started supplying Polaroid sensors to Cupertino from the iphone 4s forward. This diversification activity seems to be working admirably as Omnivision's revenue has been developing consistently as shown in the outline underneath.

Omnivision has an upper hand regarding evaluating as the normal selling cost of Omnivision's Polaroid sensors is $1.79. This is an extremely essential variable when we consider that sub-$200 devices won't pick the more expensive Polaroid sensors worth $7.30 from Sony and $1.93 from Samsung. In terms of piece of the pie, as per Bloomberg, Sony has 32% of the image sensor business while Omnivision has 14.4% and Samsung has 12.9%. Be that as it may Omnivision's value focal point should help it pick up more share later on.

Omnivision has been doing great and it as of late announced its first quarter results. The organization reported revenue of $373.7 million, up an impressive 44.5% over the former year quarter. It reported earnings of $0.42 per share, agreeably beating consensus estimates. The organization saw great interest for 8 megapixel and 12 megapixel sensors from the Asian markets.

Omnivision's Cameracube chip engineering for low resolution cameras should open up new opportunities going ahead. These low resolution sensors are ordinarily used in the front-confronting Polaroid in smart devices. In the reported quarter, 2 megapixel and higher Polaroid sensors comprised 47% of aggregate units shipped.

Also, vehicles manufacturers are currently using rearview and surround view cameras. Omnivision has picked up significant piece of the pie with OEM's in Europe and the U.s. Going ahead, this could be a strategic win and help the organization increase its piece of the overall industry in the car Polaroid market.

Omnivision holds 23% piece of the overall industry in this segment as per the organization's information and developing auto sales should further assist in the development of this business.

Challenges

In the Chinese market, Omnivision is confronting stiff rivalry. China and India are going to be the epicenter of the smartphone blast in Asia. All significant smartphone manufacturers will be vying for a real share of business sector. As officially stated above, low and mid extent phones will be the significant development drivers. These ease devices would most likely consider Omnivision's minimal effort sensors.

This also means that there will be strong interest for Polaroid sensors for smartphones and tablets. Omnivision also has to be careful about SK Hynix that is looking at the Chinese market for CMOS sensors and has effectively commenced street shows to win over customers.

Omnivision has to be watchful of progress that Samsung makes with its Polaroid sensors for the mass business. Samsung has been making waves in CMOS sensor generation as of late. Samsung and Toshiba will now be assembling 13 megapixel CMOS image sensors on a mass scale.

Samsung Electronics had officially gotten a request for creating 80 million to 90 million of these sensors not long ago and it won't be out of spot to anticipate that the Korean monster will focus on the low end of the business as well, moving into Omnivision's space.

Sony is an alternate huge danger to Omnivision's development as the Japanese organization has officially taken advantage of Apple and it is seeing significant interest for image sensors. Sony has put in considerable cash to keep up its lead in image sensors and has invested 220 billion yen since 2010 to boost creation limit.

Sony may need to cut the cost of its sensors, as per UBS analyst Ryosuke Katsura, and on the off chance that it decides to pursue this business significantly all the more aggressively, then Omnivision would face further trouble.

Conclusion

Omnivision's revenue has been enhancing at a decent pace and the cost advantage that the organization enjoys presently over peers should help it profit from the ease smartphone market. Anyway investors should also keep an eye on the moves of its rivals since Omnivision is a much smaller player and runs the risk of being elbowed out by the likes of Samsung and Sony.


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