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By all accounts the inclusion of a 2MP camera on the original iPhone in 2007 was something of an afterthought, an additional feature that was neither here nor there & certainly not a major selling point.

Given that the iPhone 3G (2008) sported the same 2MP lens it seems a fair supposition. The 3GS (2009) included a 3MP lens with autofocus whilst the iPhone 4 (2010) made a major leap, delivering a front facing camera as well as a 5MP rear facing camera capable of recording HD video.

The iPhone has subsequently followed a familiar pattern as follows:

    • iPhone 5 (2012): Apple kept the same 8MP lens first introduced on the iPhone 4s alongside a 1.2MP front camera.
    • iPhone 6 (2014): 8MP rear camera, 1.2MP front camera.
    • iPhone7 plus (2016): Apple’s first dual rear camera, 1x 12MP lens & 1x 12MP telephoto lens, as well as 1x 7MP front camera.
    • iPhone X (2017): 2x rear 12MP cameras & a 1x 7MP front camera.
    • iPhone XS Max (2018): 2x 12MP rear cameras & 1x 7MP front camera.

Viewed as an isolated timeline, & notwithstanding improvements to camera spec, HD recording, panoramic pictures, etc, the rate of change for the iPhone’s camera over its 11 year journey has been, from a technology standpoint, slow.

And with good reason: as smartphone shipments increased in tandem with global penetration it was a volume game.

But the game has changed. According to IDC the global smartphone market fell -0.3%YoY in 2017 & is forecast to decline -0.2%YoY in 2018 before rebounding +3%YoY in 2019. What’s clear is that the days of significant YoY volume growth are behind us.

Instead growth will be in ASP (average selling price), which is forecast to hit $345 +10.3%YoY in 2018 as manufacturers load smartphones with features in a bid to differentiate their product.

And the new battleground? Cameras. Where Apple opted to stick with a dual rear facing camera in its latest iteration (with a triple camera mooted for 2H19) others have not been as conservative. The Huawei P20, for example, was released in April 2018 with 3 rear Leica cameras (1x 40MP, 1x 20MP & 1x 8MP).

It was followed by the Samsung Galaxy A7 (2018) in Oct 2018 (1x 24MP, 1x 8MP & 1x 5MP) & the OPPO R17 Pro (Oct 2018, 1x 12MP, 1x 20MP & 1x 3D ToF (Time of Flight)).

Not content with a triple camera model Samsung is also scheduled to launch its first quad cam phone, the Galaxy A9, this month. It will sport 4 rear cameras (specifically a 24MP sensor in the main camera; a depth-sensing 5MP lens; an 8MP telephoto sensor; & an ultra-wide 10MP sensor).

Xiaomi, Lenovo, Asustek, HTC & Sony (6758) are all reportedly considering triple camera models while the LG40 (launched Oct 2018) has no less than 5 cameras: 1x 8MP & 1x 5MP at the front & 2x 12MP & 1x 16MP at the rear.

The ripples of this smartphone camera explosion are already being seen in image sensors where dominant suppliers Sony & Samsung are scrambling to raise capacity. In fact they are being felt across the supply chain, including the world’s leading supplier of illuminators & pupil lens modules for use in image sensor testing: Inter Action (7725).

For growth & value, small & mid cap investment managers alike this stock should be top of your list. It is covered only by Storm Research. Please get in touch to read our latest report, ‘Booming image sensor capex’.

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