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Andrew Lewis

OmniVision Technologies is the largest producer of CMOS image sensors. Product and process design is carried out in the United States. Fabrication occurs in Taiwan by TSMC while various subsidiaries and joint ventures in Asia fulfill other assembly and related services.

OmniVision is the only major image sensor producer dedicated solely to image sensor and related production.

OmniVision has the widest selection of products, is present in the most amount of markets,^[1] is frequently the first to market with the latest technology,^[2] and is the largest volume producer at the lowest cost.^[3]

The company's technologies are integrated, single-chip CMOS image sensors and CIS cameras for consumer and commercial applications including mobile phones, notebooks, netbooks, webcams, security, cameras, automobiles & trucking, medicine, and entertainment devices.

Industry

Competition

While, typical of any technology subsector, the list of failed CIS companies is large, there are still a few companies will to compete with OmniVision:

• Aptina
• Samsung
• Toshiba (TOSBF)
• STMicroelectronics N.V. (STM)
• Sony

Nevertheless, as the market matures, even OmniVision's largest competitor claims in response to being questioned about OmniVision and TSMC that "if the competition in imaging devices were strictly based on volume and cost, our approach wouldn't succeed. We don't have the large-scale fabs that [OmniVision and TSMC] do, and we won't build them."^[3]

Intellectual Property

Moore's Law

While not as fast as pure semiconductors, the average selling price does still decline at a high rate, causing rapid obsolescence of cameras.

Commoditization

Most patents are used by all industry players, thus this portion of the business quickly becomes commoditized, presenting a first-to-market opportunity.

Patent Acquisition

OmniVision with its' continually large cash hoard has purchased 850 patents^[4] from the now collapsed ex-competitor Kodak, nearly doubling OmniVision's total patent count.^[5]

Company

Sources of Revenue^[6]

Average Selling Prices are currently $1.42.

Distribution by Megapixel

Generally, prices are determined by semiconductor wafer size, so the higher the megapixels per sensor, the higher the price.

Currently,

• 24% of all sensors sold are 2mp or above,
• 23% are 1mp, and
• 53% are VGA.

Distribution by Market

While OmniVision services every camera market,

• Mobile phone sales are 60% of revenue,
• Entertainment, which includes tablets, are 20% of all sales, and
• Notebooks & webcams are 9%.

Market Share

OmniVision currently has the largest share of CMOS image sensor market share and for many years and now the highest growth in that market.^[7]

Segment Shares^[8]

• Smart Phone: 31%
• Notebook PC/Webcam: 64%
• Entertainment: 44%
• Security: 62%
• Automotive: 23%
• Medical: 48%

Edge

OmniVisions employs few main strategies to maintain its' edge over the competition.

First Mover

OmniVision frequently is first to deliver cutting edge technologies.

• OmniBSI
  • OmniVision was first to develop back-side illuminated technology for mainstream image sensors.
• OmniBSI-2
  • OmniVision is currently alone in increasing performance and reducing cost of BSI.
• 1.1u pixel size
  • In the never ending race to shrink pixel size, OmniVision usually releases the newest size first. Currently, OmniVision alone can produce sensors with 1.1u pixels.

Expensive Research

OmniVision routinely invests in technologies with the costliest required R&D.

• CameraCube
  • For which the competition seems to have no answer, CameraCube has been in production for many years, yet no competitor has been willing to make the large investment required to create their own intellectual property.
• OmniBSI-2
  • OmniVision frequently discovers the latest intellectual capital necessary to achieve smaller camera technology such as the latest improvement, OmniBSI-2, which unexpectedly resurrects a FSI technique which scales widths of metal reflectors.^[9]

Lowest Cost Production

OmniVision is the lowest cost producer^[3] due mainly to its' partnership with TSMC and unhighlighted periodic investments over the years in various steps in the production process at attractive prices and productivity such as

• VisEra
  • A joint venture between OmniVision and TSMC
  • For some manufacturing and automated final testing of CMOS image sensors
• Silicon Optronics
  • A joint venture between OmniVision and Powerchip Technology Corporation
  • To manufacture, market, and sell legacy products
  • To produce niche products such as touch panels that track touches with special optical sensors and linear sensors
• Aurora
  • Acquisition of a LCoS based microdisplay panels producer
  • For future video-centric applications in the consumer market

TSMC Relationship

OmniVision has a very close relationship with TSMC.

• Many of the latest business processes such as OmniBSI and OmniBSI-2 are developed jointly.
• Many steps of the camera assembly processed are executed by both OmniVision and TSMC.
  • Some processes have evolved into specialty joint ventures and other types of cross-ownership businesses.

Product Dominance

Smartphone Front-facing Camera

Possibly all front-facing cameras are supplied by OmniVision.

Mobile OS

iPhone

• iPhone 5 8mp^[10]
• Front-facing camera^[11]

Android

• Razr Edge^[12]

Hardware

HTC

The largest smartphone manufacturer by market share^[13] consistently selects OmniVision as supplier of main cameras for HTC smartphones.^[14]

Income Volatility

As a result of OmniVision's industry and business model, OmniVision's income, while continually generally rising, has been extremely volatile since its' IPO.

Analysts

Most analysts have historically kept a short-term focus upon OmniVision's business, predicting the company's imminent collapse or cheap hostile takeover many times since the IPO such as Zacks who frequently give OmniVision high marks when the price is high and low marks when the price is low. Some have managed to keep a balanced view, acknowledging the inherent chaos of the industry and consistent success of the company such as JP Morgan.

Most analysts' price predictions correlate more with current price conditions rather than future realizations such as Wedbush who consistently tracks its' price prediction with the current one offered in the market.

Most analysts have a history of providing mediocre business and industry data while almost completely failing in business and industry prediction. For example, it has been predicted at each large stock price drop that OmniVision has been driven out of the business and/or will be acquired cheaply all while the company was actually gaining share and returning to growth in income.

References

1. ↑ OmniVision Products
2. ↑ OmniVision News & Events
3. ↑ ^{3.0 3.1 3.2} "'Winning in Imaging Devices, The Last Bastion'---Tomoyuki Suzuki, Sony"
4. ↑ "OmniVision buys Kodak patents"
5. ↑ "Omnivision Updates its Investors"
6. ↑ "OmniVision Technologies CEO Discusses F2Q2012 Results - Conference Call Transcript "
7. ↑ ResearchInChina Market Report, Sept. 2011
8. ↑ "Omnivision Updates its Market Share Figures"
9. ↑ "Metal Scaling in BSI Array"
10. ↑ "OmniVision nets 90% of iPhone 5 8-megapixel camera orders"
11. ↑ "iPhone 4S Secondary VGA Camera is Omnivision's"
12. ↑ "Chipworks: Omnivision 8MP Sensor in Motorola Phones"
13. ↑ "BlackBerry U.S. smartphone market share down to 9%; HTC beats out Samsung and Apple"
14. ↑ "OmniVision Is Selling Off: Here's What To Do Next"