Digital Camera Market in China, 2005

Year 2004 saw a global digital cameral (DC) shipment of 74 million units, increased by 54.49 percent compared with the previous year. In 2005, the figure is predicted to reach 90 million units.

In 2005, under the conditions that domestic market continues to grow rapidly, export is well expected and foreign enterprises expands the investments, Chinese DC industry will see a prosperous period both in production and sales. Japanese manufacturers will still monopolize the market, but will be impacted by Kodak and Samsung.

The decreasing profits in digital camera industry have forced such manufacturers as Kyocera to quit. Some manufacturers, Sony and Canon for example, will have to adjust their strategies. This report addresses the business status and market strategies of major digital camera manufacturers in Chinese market.

As to the production of some major component parts, Taiwan manufacturers are active at Backend IC while ADC is mainly dominated by ADI. Also, this report has analyzed relative manufacturers of DC lens and displays.

Based on the above analysis, we think that:

1. Digital Single Lens Reflex (DSLR) cameras will rise as a new force

Due to the fierce competition in the DC market, profits in this field are further decreased, which has forced certain manufacturers to quit. Those traditional camera makers such as Canon, Olympus and Nikon have introduced DSLR cameras to avoid low price in the market and bring their core competitiveness into full play. Although DSLR camera market is relatively small, the high technology barrier to entry helps to keep its price and profit at a high level. Thus, DSLR cameras are most likely to rise as a new force in the market. According to Japan Camera & Imaging Products Association (CIPA), the global shipment of DSLR cameras in December 2004 was 300 thousand units worth 22.9 billion Yen (RMB1.76 billion), increased by 167 percent in volume and 152 percent in value compared with the same time in the previous year. On January 17 2005, Panasonic announced that it will cooperate with Olympus to develop a new 4/3 system-based DSLR camera (including the camera body, lens set and related accessories), and related technologies and equipments. In the joint announcement, they forecast the global DSLR camera market capacity will reach 2.7 million units in 2005 and will reach 5.5 million in 2007. Although the shipment of DSLR cameras only accounts for 7 percent of the total DC shipment, but the sales value accounts for over 20 percent.

2. Mainstream digital camera pixel will be 500m in 2005 and turn to be 700m by the end of the year

The mainstream camera phone pixel determines the mainstream digital camera pixel, because people generally think that DC pixel should be at least 300-400m higher than a camera phone. Only by this advantage can the DC acquire the market. Currently, the mainstream mobile phone models are priced at about ?2000. A 200m pixel camera phone must lower its price to about ?2000 to become mainstream. At present, the cost of a 200m pixel camera phone is about $350. Samsung's SCH-M309 sells at ?5700 currently. In terms of the cost decreasing speed, the cost of a 200m pixel camera phone will be about $200 one year later, then the retail price can be ?2000. The cost of a 200m pixel camera will not be lowered to $150 by the end of 2005, therefore 500m pixel DCs can be market mainstream for the whole year in 2005, but will be replaced by 700m pixel cameras in 2006.

According to statistics from ZDC, in March 2005, 500m and plus pixel DCs drew 60 percent of total market attention, while cameras with less than 300m pixel had only 2.2 percent market attention.

3.Camera phones continue to invade low-end DC market

As the consumers of digital cameras are mainly professionals or those seeking a device for taking photos, they have strict requirements for the image effect, color quality and technique standards. To them, a digital camera is for taking photos only, and they have no other function requirements to the products. When consumers buy digital cameras, they always focus on such technical indexes as convenience, image quality, color performance and exposure time. Camera phones obviously cannot meet their demands. A camera phone is first a mobile phone for communication. Taking photos only serves as an accessional application for camera phone users. In other words, taking photos is only a minor function of camera phones, which requires even lower technical standards than an instant pocket camera. Thus, the key to camera phones is how to implement attractive applications for users at a reasonable performance to price ratio. As the appeal of digital cameras and camera phones to users is fundamentally different, camera phones can�t replace digital cameras in the market. The impact to digital camera market caused by camera phones only exists in low-end market.