Digital camera market tipped for serious decline

5 Jan 2011

While shipments of digital still cameras are still performing strongly – up 10pc to 121.4 million units – analysts are forecasting a steep decline in the next three years, thanks to multimedia smartphones equipped with higher megapixel cameras.

The point-and-shoot digital still camera (DSC) — once a red-hot consumer item and a best-selling retail mainstay — has about three good years left before market shipments begin to decline, as it is supplanted by newer technologies and the omnipresent camera in mobile phones, according to the market research firm iSuppli, now part of IHS Inc. (NYSE: IHS).

Factory unit shipments of compact DSCs are projected to rise by 10.4pc and reach 121.4 million units in 2010 and enjoy modest growth for the next three years. However, production will decline in 2014 as the market matures. During that year, shipments are expected to decline by 0.6pc to 135.4 million units, with low-end DSC models expected to encounter stiff opposition from the cameras in mobile phones, which increasingly will become the primary image-capture device for consumers.

The anticipated growth of the DSC market in 2010 continues the up-and-down fortunes of the sector during the last few years. After expanding by 16.3pc in 2006, 19.5pc in 2007 and 10.6pc in 2008, the DSC space began to decelerate in the second half of 2008 as the global economy faltered. The year 2009 proved to be an even tougher period, when shipments fell 13.8pc to 110.0 million units.

Overall trends for digital cameras are unfavourable

DSC sales in 2010 profited from a resurgence in sales because of declining prices and an improved economy, according to Pamela Tufegdzic, iSuppli analyst for consumer electronics. Nonetheless, the DSC market suffers from underlying weakness.

“Overall, trends are unfavourable for a number of reasons,” Tufegdzic noted. “In particular, multimedia cell phones now equipped with higher-megapixel cameras are cannibalising low-end DSCs that have equivalent resolutions.”

This phenomenon is occurring in Asia and Europe, as consumers in these regions have grown comfortable with taking pictures through their camera phones.

Consumers, Tufegdzic pointed out, also increasingly share and store photos through social networks, such as Facebook and Flickr, which are unable to effectively process higher-megapixel pictures due to bandwidth issues — further leading them to abandon DSCs in favour of more flexible devices, such as camera phones.

Finally, the unstable economy has led to longer camera replacement cycles.

“A higher megapixel count is no longer an automatic selling point for DSCs,” Tufegdzic said. “This is because megapixel density has reached a point of diminishing returns, especially in mature markets.”

Opportunities exist in 3D, HD hybrid and DSLR space

Despite the gloomy prognosis for the overall DSC market, pockets of growth can be found within segments of the industry, such as in hybrid high-definition (HD) cameras, future 3D cameras and the higher-end range of consumer cameras known as digital still lens reflex (DSLR).

The hybrid HD camera is an important technology trend that is fundamentally changing the DSC market by integrating high-definition video recording and still-camera capability into a single device. Although still in the somewhat early stages at this time, hybrid cameras will become more popular and affordable in the marketplace, especially as advancements are made in silicon processing capability and as prices for flash memory storage decline.

Shipment of hybrid cameras will grow from 8.3 million units in 2009 — representing about 7.6pc of total DSC units shipped — to a staggering 120 million units in 2014 — accounting for about 89pc of the total market. Already, hybrid camera models are available from Eastman Kodak, Canon, Nikon, Samsung and Sony, and more, and hybrid cameras at the US$150-$200 price point represent the next big growth opportunity in the industry, iSuppli believes.

The 3D camera represents another area of growth for the camera sector. With 3D games and video already being offered, iSuppli believes 3D cameras will likely hit store shelves by the 2011 to 2012 time frame.

Nonetheless, such cameras are not expected to become a mainstream technology until after the 3D screens that are used to show 3D pictures and video reach about 30pc penetration.

Among DSLR cameras—used more by professional photographers in the past—falling prices will spur increased adoption by consumers that are now able to make the upgrade. 

Other areas of growth for digital cameras include the integration of features such as GPS and Wi-Fi, increasing their attractiveness and potential for every day use.

GPS systems inside cameras will allow users to capture the exact location where each image was taken — a process known as geo-tagging — taking travel and location photography to a new level. Wi-Fi chipsets inside digital cameras will allow consumers to send photos wirelessly to the internet, a PC or a printer.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years