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Smartphone cameras rarely take a blurry photo — even selfies shot on the move. You may think that you have become more proficient in your photography skills. But perfect digital images have less to do with steady hands than a new generation of chips.
In recent years, the quality gap between smartphone and traditional cameras has narrowed greatly.
Until recently, the anti-shake functions on smartphone cameras meant that the camera lens moved with its surroundings to minimise any blurriness of pictures taken while moving or in low light environments.
But a new type of technology within the camera known as a “sensor-shift” stabilisation system has greatly improved anti-shake properties. All smartphone cameras are equipped with an image sensor, a tiny device that processes the light coming into the lens and turns it into a digital image. An advanced version of these sensors can adjust the focus, resulting in higher quality photos.
These advanced sensors are expensive, which is why they were mostly used in professional cameras. But as smartphone users want increasingly higher quality pictures, demand for these specialist components is growing.
Smartphone makers are aware that images are just as important to users as texts and calls. Buyers will pay for this feature. So along with pretty pictures come some record profits.
The camera on the iPhone 12 Pro Max, for example, has received glowing reviews about its super-clear pictures. It was Apple’s first phone to use a sensor-shift stabilisation system.
Just three suppliers — South Korea’s LG Innotek, Sharp of Japan and Chinese maker Ofilm — control this niche market. That list was cut to two last year after Ofilm was included on a sanctions list put together by the US Department of Commerce, accused of human rights violations against the Uyghur people. Ofilm was removed from Apple’s supply chain.
That means the approximately 15 per cent market share that Ofilm held should go to rivals such as LG Innotek, which already holds half the global market share.
The market for these is growing too. While Apple used the sensor-shift for just one of its flagship models last year, it is rumoured it will include the technology on the entire next-generation iPhone 13 line-up.
LG Innotek’s steep capex increase of 70 per cent last year to boost capacity of sensor production lines reflects the growing demand from smartphone customers. For the full year, analysts expect its operating profit to increase by almost two-thirds to a record $1.7bn.
Yet shares of LG Innotek trade at 9 times forward earnings, a discount of about 40 per cent to regional component maker peers, which have more diversified businesses. Some worry about LG Innotek’s heavy reliance on image sensors for most of its sales given rapidly changing consumer tastes. Not many companies make premium smartphones. Samsung, for example, has its own image sensor business within its chip unit, and looks an unlikely future client of LG.
But the trends are encouraging. Global smartphone sales are still growing. Shipments of smartphones should reach 1.4bn units in 2021, an increase of 8 per cent from the previous year, according to research firm IDC. Apple, LG Innotek’s biggest client for image sensors, is doing even better. iPhone sales leapt 50 per cent year on year in its quarter to June, regardless of the typically slow sales before its annual autumn iPhone release.
Besides, at the current pace of technological progress, and consumers’ high expectations for sharp selfies, those advanced sensors may one day be a requirement for all smartphones.
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