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Low-end Digicam Flood Coming?
(Monday, August 6, 2001 - 16:42 EDT)

Taiwanese digicam manufacturers are gearing up for huge production volumes of low-end digicams...

A number of Taiwanese digicam makers appear poised to move up to the 1.3 megapixel quality level, and produce huge volumes of inexpensive digicams for the export (read: "U.S.") market. Read the report for the details...

Original Source Press Release:

Taiwan digital camera makers thrive amid PC slump

By James Peng

TAIPEI, Aug 3 (Reuters)
While much of Taiwan's once-thriving electronics industry continues to founder amid a global downturn in computer demand, the island's digital camera makers are fixing their focus on skyrocketing exports.

According to the quasi-governmental Institute for Information Industry (III), Taiwan's digital camera production is likely to surge 86 percent this year to 10.5 million units sold, and record a 147 percent jump in value terms to US$1.41 billion from 2000.

While the island already accounts for some 30 percent of global production in terms of volume -- most of which occupy the very low end in both technology and profit margins -- Taiwan companies are well placed to benefit from the global popularity of digital cameras as local producers move up the value food chain, say analysts.

Taiwan manufacturers could capture up to half of the world market by 2005, said Yvonne Chen of the III's Market Intelligence Center (MIC), adding the ``outlook is bright as Taiwan gradually enters higher-end production of digital cameras''.

Taiwan manufacturers, which are now good at making low-end 350,000-pixel and 1.3 million-pixel digital cameras, are expected to enjoy a further 45 percent annualised growth in the value of output in 2002.

A pixel is a single point in a graphic image. More pixels in a given area makes for a clearer image.

``Taiwan's digital camera industry is bucking the overall economic slowdown, and is expected to enjoy another three to five years of prosperous growth,'' said Michael Fang, fund manager of the US$14 million E-Commerce Fund of AIG Securities Investment.


The high growth in digital cameras contrasts sharply with the 12.3 percent fall in Taiwan's electronic exports in the first half of 2001 from the year-ago period and a 14.1 percent decline in exports by the information technology and telecommunications sector, Taiwan's two most globally competitive industries.

However, profit margins are slim at the lower end of the market where most Taiwan companies now prevail.

Nomura Securities electronics analyst Frank Lee said Taiwan makers have difficulty in producing digital cameras with higher-resolution -- for high end retail cameras three million pixels or above.

``The Japanese companies still control it (high-end digital camera production) and are not likely to outsource it in the near future because (profit margins are) still quite high,'' Lee said.

Lee said once the products have reached a more mature stage -- ``in two to three years'' -- Japanese firms will outsource more and turn to Taiwan, which is very good at commercialising consumer technologies.

Currently, there are 13 digital camera makers in Taiwan, including leaders Premier Image , Primax , Acer Communications and Multimedia , Mustek Systems and Teco Image .

Premier Image is one of the world's largest producers of digital cameras, with contract clients including Fuji Photo , Nikon , Olympus and Konica .

The company expects to churn out 1.2 million to 1.3 million digital cameras this year, doubling its 2000 output of 600,000.

Premier said in mid-July it planned to issue a US$85 million convertible bond in the next two to three months to raise funds for expansion both in Taiwan and China, but it declined to give details.

Premier's stock price has risen some 50 percent so far this year to close at T$45.40 on Friday, far outperforming the 4.4 percent retreat in the main index (^TWII - news) over the same period.

Teco Image -- which derives some 15 percent of revenues from digital cameras -- has seen its shares soar more than six-fold to T$52 on Friday from T$8.45 at the end of last year.

MIC's Chen said 90 percent of Taiwan's digital camera production is for original equipment manufacturing (OEM) for low-end products, while own-brand production accounts for only 10 percent.

Chen said Taiwan players could improve profit margins by producing cameras with higher pixel counts, and by integrating cameras with other devices like MP3, PDA (personal digital assistant) and mobile phones to become multi-function tools.

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