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May 25, 2006 BULLETIN

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Image Sensor Sales will Cross $7 Billion in 2006 Despite Price Erosion

Intensifying competition and stamina of VGA devices cool off the hot growth rates

For the second year in a row, sharp price erosion will curb revenue growth in image sensors during 2006, but once again, strong unit volumes will drive sales to a fifth-straight record level this year. Total shipments of charge-coupled devices (CCDs) and CMOS image sensors are expected to grow 31% this year, reaching 1.9 billion units worldwide, and that will be enough to push sales up 12% and across the $7 billion mark, based on a forecast in IC Insights’ 2006 Optoelectronics, Sensor/Actuator, and Discrete (O-S-D) Report.

In 2005, image sensor sales grew a little more than 11% to $6.3 billion with unit shipments rising 45%. The optoelectronics chapter of the O-S-D Report shows average selling prices (ASPs) collapsing by 24% in 2005 and then dropping another 15% in 2006.

However, the growth in image sensors has been nothing less than phenomenal since the end of the 1990s. The proliferation of mobile camera phones and the switch from film to digital photography has increased image sensor revenues by a cumulative average growth rate (CAGR) of 62% per year between 2001 and 2005. Unit volume has skyrocketed by a 112% CAGR in the same timeframe.

IC Insights sees the torrid growth rates simmering down in the second half of this decade, while suppliers attempt to move new image sensor designs into automotive systems, notebook computers, and other embedded applications. Image sensor revenues are now expected to increase at a CAGR of 15%, with unit volumes growing at a 20% average rate in the 2005-2010 timeperiod. By 2010, image sensor sales are expected to reach $12.8 billion with unit shipments topping 3.6 million, according to the IC Insights O-S-D forecast.

In the image sensor arena, CMOS-based devices continue to grab share away from CCDs due to the strong growth in camera cell phones and the ability to integrate more circuit functions with pixel arrays on a single chip. CMOS devices are forecast to account for more than 60% of the total image sensor market in 2006, up from 45% in 2003. According to IC Insights’ outlook, CMOS image sensors will claim more than 80% of the total revenues and over 90% of the units in 2008.

While CMOS image sensor suppliers continue to launch new technologies and drive up the pixel densities on devices, the surprising staying power of sub-megapixel VGA product has played a key factor in pushing down ASPs since early 2005. The culprit has been the growing popularity of cheap (sub-$70) camera phones, which has caught many leading CMOS image sensor makers flat footed while they attempt to shift the market to more profitable devices with 3Mpixels and above densities. Finally, in 2006, 1.3Mpixel CMOS image sensor sales will finally overtake VGA-resolution devices in camera phones—45% versus a surprisingly strong 40%, respectively (see chart).

Unquestionably, the design-in "sweet spot’ for 2.5 and 3G camera phones is moving up to 3Mpixel and 5Mpixel imagers, but it will still be a year or two before those devices have a measurable impact on the total market (Figure 1).

Figure 1

The new 2006 O-S-D Report expands IC Insights’ coverage of the semiconductor industry with detailed analysis of trends and growth rates in the optoelectronics, sensor/actuator, and discrete market segments. The report is available for $1,990 in either a three-ring binder or CD-ROM format. Additional individual copies of the CD-ROM or binder sell for $495 each. The report is also available under a multi-user corporate license for $5,290. Special discount rates for the O-S-D Report are available to current subscribers to IC Insights’ McClean Report, which provides an in-depth analysis of the IC portion of the semiconductor industry.

About IC Insights

IC Insights, Inc., based in Scottsdale, Arizona, is dedicated to providing high-quality, cost-effective market research for the semiconductor industry. Founded in 1997, IC Insights offers coverage of global economic trends, semiconductor market forecasts, capital spending and fab capacity trends, product market details, and technology trends, as well as complete IC company profiles and evaluations of end-use applications driving demand for ICs.

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