The Golden Age (an Analysis of Sony's Sensor Markets)

By Kevin Purcell

I pointed Mike to this slide in the Sony investors report that was posted on Image Sensors World.

The graphic both shows (and tries to hide by using area comparisons) the major changes in the market for Sony's image sensors over four years, fiscal year (FY) 2013 to FY 2017.

The first thing you notice is all the growth is in "non-traditional" camera markets: smartphone and tablet cameras, automotive cameras and Internet enabled security cameras. Ordinary still cameras are in decline.

The volume of compact digicam (DSC) sensors Sony will ship will drop from 51 million to 13 million pieces over the four years; that is, the FY 2017 market will be about a quarter of the size of the 2013 market for Sony. But the total market for DSC sensors will drop from 92 million (i.e. using Sony's volume and current share 92 = 51 * (1/0.55)) to 13 million (= 13 * 1.00) so the total DSC sensor market will be 15% of the FY 2013 market.

Compact digicams really are going away. I suspect the remaining will all be long zoom digicams or large sensor compacts—the two areas where smartphone cameras can't compete.

Perhaps more important for the TOP readership are the numbers for interchangeable lens (ILC) sensors, from type 1-inch to 36x24mm ("full frame"), from FY 2013 to FY 2017. The FY 2017 market for Sony ILC sensors will be about 55% the size of the 2013 market. The total market for ILC sensors will drop by about half from 60 million (60 = 18 * (1/0.3)) to 29 million (13 * (1/0.45)) so the total ILC market will be 50% of the FY 2013 market.

So Sony expects half the volume of ILC cameras in the market in FY 2017.

That means fewer cameras and fewer redundant product iterations, but perhaps less choice too. On the other hand it might mean more narrow niches in the market will be served. Camera company makers are going to move to where the largest margin is.

Sony Semiconductor is helping that by pushing 4/3, APS-C, "full frame" and now "645D" sensors to any camera company that wants them.

Sony (the camera making part) is in a scramble to get their camera systems into position before the market sets in concrete again (rather like the old SLR film camera market with two major protagonists). That means other companies are going to have to do the same. This would explain Sony's rapid iteration in the market with "mark 1" rapidly followed by "mark 2" the next year to gain traction in particular niche markets. This sense of urgency would also explain Sony's aggressive pricing strategy on A7 "full frame" mirrorless cameras.

I'd expect to see "full frame" (or larger) cameras from Fuji, Ricoh/Pentax and perhaps Olympus in the next year or so. Not because of "sensor-size fanboyism" but because the business is driving them in the direction of higher margins. All three of these companies have "hobby camera" businesses—the business is not a real income generator, and in most cases makes losses, but seems to appeal to Japanese traditionalism ("we used to make good cameras and film and we still do even if there is not much of a market because we're Ricoh/Fujifilm/Olympus").

It's also possible that it may mean fewer ILC camera companies as some of the traditional camera companies in a loss-making business get squeezed and decide to exit the market. You can see parallels with previous market turndowns in the 1970s, 80s and 90s and the trail of missing companies they left. Nikon and Canon may have already seen this direction and have decided that they'll come out ahead after yet another market transition if they keep a steady path. I don't think that's guaranteed this time. It would also explain Nikon's strategy of pushing "full frame" DSLRs now. I still can't understand why Canon is lagging in sensor performance. Perhaps they'll start buying Sony sensors too but if they haven't started by now one starts to wonder what their sensor strategy is.

In the meantime this may be a golden age for camera purchasers. The quality and variety are high. Competition is keeping up pressure on the manufacturers to keep prices down. It can't last.

Perhaps this is indicating a future camera market that looks more like the film camera market of old. People will upgrade their cameras every five to 10 years just like in the old days (but they no longer need film in the meantime).

Kevin

©2014 by Kevin Purcell, all rights reserved

Links in this post may be to our affiliates; sales through affiliate links may benefit this site.

Christmas is an orgy of commercialism! Sorry, I meant an interlude of holy reflection

(To see all the comments, click on the "Comments" link below.)
Featured Comments from:

Ken: "For my tastes, this article sounds too much like a knock off of the Thom Hogan article that other commenters apparently already linked to. I am not saying there was any plagiarism involved but just seems to make mostly the same points, coming right after (as far as I can tell) Thom's article."

Kevin Purcell replies: No plagiarism, Ken.

I emailed a note to Thom Hogan on Saturday, Nov. 29 pointing to that slide in the Sony presentation and said what it implied. We exchange emails sometimes. He emailed back saying he'd seen the Image Sensor World article and was thinking about writing about it.

I also sent the same hint in an email to Mike on Saturday, Nov. 29 which he sort of used in this article on Sunday, Nov. 30. Note the thanks to Kevin Purcell at the end of the article—that thanks was for the Sony information.

I corrected one problem with Mike's interpretation on Sunday in email but also felt he missed the big implication of the chart. So I wrote a long comment to that article (the text above). I submitted it as a comment and also sent it in a text file to Mike in email and said he could use it as a blog post if he wished.

Mike was on the road over the weekend so he didn't post it until today.

Thom Hogan published his article on Monday, Dec. 1.

Mike published my text (from Sunday) on Tuesday, Dec. 2.

Both Thom and I came to the same conclusions independently.

Thom does make a very good additional point about the impact of the reduced number of camera sales on funding of blogs in the future. That's an interesting point for TOP and its readership...."

Richard Newman: "This analysis may well be correct, but I would caution not to consider it definitive, for three reasons:

1. The data was presented by a company to its shareholders—not a disinterested party. This means that there is considerable doubt as to why it was presented as it was.
2. It doesn't address new technology which may be developed and implemented in the next few years and affect the market. For example the 'selectable focus' technology may become widely available, which could change the market.
3. The effect of increased interest in video may also skew buyer spending.

"All of which doesn't say this analysis is wrong, but just that it needs to be considered less than definitive."

Comments

[Dave Stewart]

Thom Hogan has written recently about this too, in his, "More Doom and Gloom" article. He also comments on the likely knock-on effect for, "Web sites counting on advertising and affiliate income to cover their content creation" ...not good.

http://www.dslrbodies.com/newsviews/more-doom-and-gloom.html

[Phil Service]

Just FYI, Thom Hogan has a thoughtful article about this same Sony graphic here: http://www.dslrbodies.com/newsviews/more-doom-and-gloom.html

[BWJones]

Optics still matter and there are some things that cell phones cannot yet do.

it is clear that what cell phone cameras can’t do is optical zoom (yet) and physics does define some of the limitations of sensor capture efficiency. Specifically, larger sensors do by default make for more pleasing images from a number of perspectives including sensitivity, color aberration, optical bokeh, etc… In addition to the benefits of a larger sensor with larger pixel imaging sites (5.8 µm² for the RX100 III vs. 1.5 µm² for the iPhone 6), making the optical elements of a camera bigger and made of glass elements with coatings enable better image quality. I talked about all of that after spending a weekend in Portland with the Sony RX100III here:
http://prometheus.med.utah.edu/~bwjones/2014/11/sony-rx100-iii/

[Robert Roaldi]

A tailoff in sales is not so surprising, is it? Once all the camera buyers have bought their cameras, they stop buying. Isn't that what happened with film SLRs? I don't see why that would automatically cause a drop-off in lens sales. All those bodies will need lenses.

[Rod Thompson]

I fully agree with the three stooges from sigma being the bedrock of a good Sony system. I had a strange experience with a Nex 7 though. I fell for the camera/50mm combo for walk around. It's strange because the camera failed to excite generally (I sold it after 8 months) and I really struggle with the traditional portrait focal length (45mm oly is rarely used), but that combo I still miss. It had a rich, clear but not "biting" sharpness and a focal length that really worked for me. It also made some of the most "glowacious" mono images I have created. Maybe it was just a good contrast to the olympus?

[Grant Tomlinson]

Interesting points. I do wonder about the prediction that Fuji, Olympus, et al will go full frame. No argument on everyone seeking higher margins. However, I think Olympus and Fuji are already showing their product strategy for higher margin cameras and lenses. It seems to be through better specified bodies with more capable lenses.

I would think the investment needed to move to a full frame product strategy from 4/3 or APS-C would be significant for Fuji or Olympus. It is also a strategy that has them going head to head with Canon, Nikon, and Sony. All in the context of camera divisions that have not shown a profit in years. It's a high risk strategy that would seem to depend for success on CaNikny failing to innovate and execute in their product strategies. That would be a tough sell to the C-suite.

[Moose]

The idea that Sony knows the future better than the endless trail over millennia of failed prognosticators seems odd to me.

Just because they are willing, and foolish, enough to make detailed predictions doesn't mean they know more than others who choose not to do so.

[Steve Rosenblum]

Well the Fuji x100s is a really awesome camera and, at the present price of $849, it's a killer deal. If you like a 35 mm FOV that is. Incredible lens and really lovely looking files, even the JPEGS are lovely. Many photographers have gone to using JPEGs instead of RAW from this camera with JPEG settings tweaked different ways for 3 or 4 custom settings sets (BW, Velvia look, 1970's color look, etc..). David (The Strobist) Hobby has written eloquently about using the camera in this way.

[Sarge]

[I]t is clear that what cell phone cameras can’t do is optical zoom (yet)...

Yes they can.

Maybe not...

[Kevin Purcell]

@BWJones

In this write up I just addressed "conventional" stills cameras. For cellphones the future is different. Computational imaging is going to have a significant impact on future cellphone cameras. They may even end up using more sensor area (by adding more cameras. Or perhaps under 16 small lenses, like Pelican suggest) along with a lot of computation to deliver significantly better images.

Apple has been patenting dual camera setups for the rear camera with a higher resolution monochrome camera and a lower resolution color camera whose images are merged (in interesting ways) to create the final image. Along with with superresolution (using camera shake and multiple images to make sharper final images) and 3D imaging (to give a depth map to the image that you can use for selective focusing) will result in images from future cellphones looking more like images from larger sensor cameras. That will have an impact on the market for conventional ILC cameras.

@Richard Newman

Sony has a requirement to make the information they disclose to their investors as accurate as possible. Especially their warnings of downsides. So their worst case has to be pretty bad (all the stuff on the left side of that chart) but reasonable.

This is about demand for products not technology. The market is shifting. The new technology that is currently being developed will apply to the growth markets on the right side of the chart. I don't think we'll see a lot of computational imaging in conventional DSC or ILC cameras.

Video might affect the market for ILCs but I suspect that's already factored into Sony's calculation. Sony don't care if the camera is only for stills or for 4K (or by 2017 8K) video they've been working on sensors for both. The issue is what the market wants and the market wants fewer ILC cameras.

@Robert Roaldi

A tailoff in sales is not at all surprising but for someone in business to say it is a reinforcement that the market is changing. People will be more happy with their current cameras. This idea of "the last camera" has been a trope for Thom Hogan for some time now: is the camera you currently own potentially your last camera?

@Grant Tomlinson

Larger than "full frame" may be the route for the non-Canikony camera makers. I could see Fuji making an "X100-like" camera using the Sony 50Mpixel 645D sensor and invoking their own history of the FW690. A sort of X645. This route has the advantage of not needing a full new lens set which has been the problem for moving to a different sized sensor. Olympus could try this too but the lack of a digital Trip (so far) makes one wonder if they like that idea. Same with Ricoh. Their focus would be how small can you make a GR with full frame or even a 645D sensor? It's just another model revision for them with a bigger lens.

@Moose

Sony has a better grasp of this because they've doubled down on making sensors. Forget Sony the camera company. Most of their money over the next few years will be coming from image sensor manufacture. This is an area where they need to understand their market.

@Sarge

Maybe not. Thin is in. :-)

But computational imaging will get cellphone cameras part of the way there without increasing the thickness of the camera but not to superzoom focal lengths.

For those interested in what computational imaging might hold you might read these links for an overview:

http://en.wikipedia.org/wiki/Superresolution (using camera shake to make sharper images)
http://www.wired.com/2013/09/computational-imaging-the-next-mobile-battlefield/

[Sarge]

@ Kevin Purcell

I agree that major listed companies like Sony can be relied upon to forecast their market share and earnings accurately on a year-to-year basis. More iffy over the medium term. They tend to be conservative though, lest a shortfall lead to an investor backlash.

It seems that Sony, the Colossus straddling the sensor market, is channeling Paul Valery: "The future [of digital imaging] isn't what it used to be."