The Zhitong Finance App learned that on December 12, according to statistics from Qunzhi Consulting, mainstream smartphone CIS (13M and above) prices in the first half of 2024 are expected to rise by about 20% compared to the second half of this year. With the gradual increase in the middle and high-end CIS production capacity in mainland China in the second half of next year, the CIS price trend is stabilizing. According to Qunzhi Consulting's analysis, in 2024, fab makers in mainland China will enter a “production capacity expansion period” in the CIS field.

Qunzhi Consulting said that at the beginning of the fourth quarter of 2023, SK Hynix announced the discontinuation of production of pixel products of 16M and below, including the production capacity of 8-inch BSI wafers. At the same time, CIS chip manufacturers in mainland China are gradually increasing the number of domestic 12-inch BSI foundry products. Currently, the capacity utilization rate of 8-inch BSI foundries is very low. It is expected that the product structure will be continuously adjusted in the future to increase capacity utilization.

First, as overseas manufacturers withdraw from 8-inch BSI production capacity, in 2024, 12-inch wafer foundries in mainland China will fully absorb 8-inch BSI foundry and transfer production capacity. Second, the high-resolution small-pixel solution in the non-stack process led by Geke Micro has now been mass-produced on a large scale. Based on cost advantages, future demand will increase dramatically, which in turn will take up more 12-inch BSI wafer production capacity. Again, Howell Technology successfully mass-produced high-end large-pixel products at its 12-inch foundry in mainland China and received good feedback from the market. Demand is expected to increase significantly in 2024, and demand for wafer production capacity will also increase dramatically, driving a rapid increase in 12-inch stack production capacity.

Based on the above, it is expected that after 2024, the production capacity of 12-inch BSI and stack processes in mainland China will continue to grow, releasing more high-end mature process production capacity and filling the supply gap brought about by production cuts by overseas manufacturers and increased demand for high-end mature processes.

Inventories are returning, demand is recovering, short-term price trends are rising, and chip makers are focusing more on profit levels

In the second half of 2023, the CIS inventory previously accumulated was gradually reduced, especially pixel products of 13M and above. Upstream production capacity has been strictly controlled. At the same time, the return of Huawei phones has pushed the supply chain to increase stocking plans, which has stimulated a significant recovery in downstream demand. Influenced by the withdrawal of Korean manufacturers from some CIS standard products, chip makers began to adjust their strategies, no longer simply pursuing market share, but focusing more on raising profit levels. Therefore, starting from the fourth quarter of this year, the 108M products in greatest demand quickly put forward price increases to increase gross profit and then increase production capacity supply.

Focusing on improving profit conditions, Korean chip vendors took the lead in announcing price increases for all products in the fourth quarter of this year. Although mainland Chinese chip manufacturers plan to continue expanding production capacity, the release of production capacity from major production expansion plans will be delayed until the second half of next year. Under the premise of guaranteeing supply, mainland Chinese chip manufacturers will also adjust their pricing strategies to push CIS prices back up gradually.

CIS mobile phone shipments bucked the trend: after falling for 8 consecutive quarters, the third quarter reached 1.11 billion units

Global mobile phone image sensor (CIS) demand showed an upward trend in the third quarter of 2023. According to Sigmaintell (Sigmaintell) data, global mobile phone CIS shipments in the third quarter of 2023 reached about 1.11 billion units, a slight increase of 1.6% over the previous year. With the release of many new high-end products in the fourth quarter, it is expected to further drive the growth of CIS demand. This is mainly due to the following three factors:

First, the revitalization of the overseas market economy in the second half of this year has led to an increase in demand in overseas markets. Various brand terminals are stocked in advance to prepare for subsequent production needs of complete machines. Second, as CIS inventories gradually return to a healthy level, in order to prevent a sharp rise in prices from affecting the BOM cost of the whole machine, the stocking plan will be increased before the price rises. Once again, the return of Huawei to the market has led the supply chain to prepare goods ahead of schedule on a large scale, and other brands have followed suit, driving a rapid increase in overall CIS shipments.

Demand for 50M (≤0.7 um) is expected to exceed 600 million pieces, an annual increase of nearly 60%. Shortage in supply will drive up prices

Demand side: Due to the overall reduction in component costs for low-end models in 2023, there is more room for image module upgrades. According to statistics from Sigmaintell (Sigmaintell), the main camera specifications of low-end models are gradually being upgraded, from the original 13M/16M specifications to 50M (≤0.7um), and this trend is expected to continue to rise in 2024. Demand for 50M (≤0.7 um) is expected to exceed 600 million units, an increase of about 57.8% over the previous year.

The main drivers of this trend are twofold:

First, demand for 50M (≤0.7 um) continues to increase due to increased demand for low-end models in overseas developing countries. Mainly, demand for higher resolution cameras is expanding in this market, and with the rapid development of markets in these countries, users' requirements for photography quality are also increasing.

Second, the performance requirements for functions such as ultra-wide angle and telephoto in mid-range and high-end models are constantly increasing, and higher resolution cameras are needed to meet users' higher expectations for image quality. Driven by Apple's plan to upgrade to high resolution and ultra-wide angle, Android manufacturers will also be more willing to upgrade to meet market demand. Market competitive pressure and user demand for high-resolution camera functions are driving the entire industry chain to a higher level.

Overall, the trend of upgrading the main camera specifications of low-end models will continue in 2024, and the expansion of market demand is mainly affected by the promotion of overseas markets and the functional upgrades of mid-range and high-end models. This provides more room for technological advancement and innovation in camera modules.

Supply side: In the first half of 2023, Samsung occupied nearly 70% of the supply share in the 50M (≤0.7 um) image sensor (CIS) field and was in a dominant position in the market. Although the production capacity of domestic manufacturers increased in the second half of 2023, this did not change the current situation where supply is too concentrated. At the same time, 50M (≤0.7um) CIS has supply chain bottlenecks and technical barriers, limiting the ability of brand customers to switch or select other suppliers in the short term. Downstream brand customers have relatively limited bargaining power for 50M (≤0.7 um) CIS.

Overall, the bargaining power of brand customers is relatively limited due to the concentration of upstream production capacity supply and the release of new production capacity, which is expected to further increase the price of 50M (≤0.7 um) products.

Steady increase in production and relentless innovation: twin engines for long-term development

In the field of production capacity, as global demand for image sensors continues to grow, these foundry factories are expected to further meet the market's urgent demand for high-performance, high-quality images through more advanced manufacturing technology. In particular, fab makers will accelerate the introduction of more innovative technologies, such as high-end pixel processes, 3D packaging, and advanced packaging materials, to meet the needs of diverse application scenarios, including intelligent imaging, virtual reality, and augmented reality.

In terms of technological innovation, continuous breakthroughs in small-pixel design will not only improve resolution and sensitivity, but are also expected to push image sensor applications in a more detailed and accurate direction. The widespread application of deep learning algorithms will further promote the intelligence and adaptability of image processing and provide more accurate solutions for image acquisition in various scenarios. At the same time, continuous innovation in isolation technology will further improve the performance of image sensors in complex lighting environments, bringing users a sharper and more realistic image experience.

In the future, closer collaboration between mobile phone manufacturers, chip designers, and foundry foundries will become a key driving force for the development of the industry. This collaborative effort will accelerate the promotion and marketization of new technologies and promote the wider application of image sensor technology. At the same time, with the continuous development of fields such as artificial intelligence and autonomous driving, the demand for high-performance image sensors will continue to increase, further promoting the continuous innovation and evolution of the entire industry chain.