June 10, 2004

No more Digital Cameras...

Megapixel Phones Encroach on Digital Camera Turf

Wed Jun 9, 9:44 PM ET Add Technology - Reuters to My Yahoo!

By Kim Miyoung and Nathan Layne

SEOUL/TOKYO (Reuters) - Asia's top mobile phone makers are rolling out handsets equipped with cameras so advanced many consumers may come to the conclusion they don't need a separate digital camera any more.

That prospect should worry digital camera makers like Canon Inc, which could lose potential customers to a slew of snazzy new phones that take pictures with up to three megapixels of resolution, analysts say.

Megapixels are the measure of how many million picture elements are captured in a digital snapshot and one of the key ways digital camera makers differentiate their products.

"Camera phones are advancing to the point where they can attract consumers away from digital cameras," said Koo Hee-jin, an analyst at LG Investment & Securities.

Analysts have been warning about the threat camera phones pose to the digital camera industry since the first one was launched in Japan in late 2000. But so far there has been little impact -- even Sharp Corp's introduction of the world's first megapixel phone in May 2003 didn't appear to affect demand.

The first handsets had cameras capable of taking 110,000 pixel pictures, good enough for photos posted on a Web site but far short of the two megapixels needed to produce a sharp postcard-sized print.

Now many of Asia's leading phone makers -- from Samsung Electronics Co Ltd to LG Electronics Ltd to NEC Corp -- have camera phones with one, two or even three megapixels, bringing them closer to digital camera turf.

South Korea (news - web sites)'s LG, the world's fifth-largest cell phone maker, rolled out a two-megapixel camera phone last month and local rival Samsung, the world's third-largest handset manufacturer, plans to follow suit this month.


But Japan's Casio Computer Co will trump them all when it comes out with the first 3.2-megapixel handset through telecoms carrier KDDI Corp later in June. In terms of pixel count, it will be on par with some of Casio's own cameras.

"The emergence of the 3.2-megapixel phone will have a direct negative impact on the digital camera market from three megapixels on down," said J.P. Morgan analyst Hisashi Moriyama.

"Demand for the three-megapixel category should naturally begin to shift from digital cameras to camera-equipped phones."

Sales of camera-equipped mobile phones outnumbered those of digital cameras last year for the first time, rising almost five-fold from 2002 to 84 million.

U.S.-based market research group Strategy Analytics estimates the market will double this year to 174 million phones. Digital camera shipments are expected to grow a slower 40 percent to 68.5 million units this year, according to UBS analyst Ryohei Takahashi, who sees the market peaking at 77.5 million units in 2005 before falling slightly in 2006.

Still, even the most advanced camera phones match up with a segment of the camera market that is waning in importance. Only about five percent of all camera shipments are in the two-megapixel category, meaning Samsung and LG's new phones would be addressing a very small portion of potential demand.

Some of the best-selling digital cameras are of the four- and five-megapixel variety. Six- and even eight-megapixel cameras are gaining in popularity, as are digital single-lens reflex cameras.


Megapixels are anyway waning as the main factor influencing purchases as people become better informed about specifications like lens quality, zoom performance and data storage capacity and special features such as anti-shake protection.

"I would rather buy a digital camera than a megapixel phone since camera phones are still in an early stage. They mainly focus on increasing pixels but are far behind in other functions such as auto focus and memory size," said Yoo Jae-whan, a 23-year-old student in Seoul.

Digital cameras are also equipped with more advanced image-capturing chips, known as charge coupled devices (CCD).

"We don't believe there is a direct impact on our digital camera business from the sale of a mobile phones with high resolution cameras," said Ken Sugiyama, operations manager at Fuji Photo Film's public relations division.

"The quality of a picture is determined by the function of the lens, the CCD and the processing of the picture as a total package," he said.

Nor is Casio worried about cannibalising its own market with its three-megapixel phone.

"Generally speaking, a mobile phone is meant to be carried with you all the time and its main purpose is not for taking pictures. It's more for if you want to take a picture as a quick memo of something or if you just happen to come across a 'shutter chance'," said spokesman Toshihiro Watanabe.

"The camera phone has really started to develop and take off since last year, but it isn't as if the digital camera market has not grown rapidly as well."

Yahoo! News - Megapixel Phones Encroach on Digital Camera Turf

Posted by Craig at June 10, 2004 07:56 PM