Jabil's Global Mechanicals Intelligence Archive

Global Mechanicals Intelligence

Q2 2024 | APRIL- JUNE

MARKET OVERVIEW

• Optical lens manufacturing is concentrated in Germany, Japan, Taiwan, and mainland China. 
• The optical lens industry has gradually shifted to China in the 21st century.
• Japanese manufacturers have gradually withdrawn from the traditional optical cold processing industry instead of focusing on developing high-end optical processing, testing technology, and equipment. 
• This strategic shift has led to the transfer of optical lens manufacturing to Taiwan and mainland China. Cost-effectiveness, skilled labor, and technological advancements have contributed to this transition.
• The rapid growth of consumer electronic products represented by smartphones has driven Taiwanese companies such as Largan Precision and Genius Electronic, which mainly produce plastic lenses, to become the world's leading enterprises in optical lenses quickly.
• With the development of China's security video surveillance, automotive industry, and emerging consumer electronics industries, Chinese mainland optical lens manufacturers have gradually grown, after decades of technology and experience accumulation, to become large-scale manufacturers, companies such as Sunny Optics, Phenix Optics, United Optoelectronics have become important participants in related market fields.
• The market forecasts Largan's revenue to increase significantly in 2024. Largan's high-unit-price glass-plastic hybrid lens shipments are growing rapidly. Among them, the iPhone 15 Pro Max will still account for 40–45% of iPhone 15 shipments in the first half of 2024, and the high-unit-price periscope lens used by this phone by Largan will provide key support during the off-season in the first half of 2024.
• Sunny issued a profit warning on the Hong Kong Stock Exchange in January, showing that the group's net profit in 2023 will be approximately RMB 1.08 billion to 1.2 billion, a 50% to 55% year-on-year decrease. Its lowest annual net profit will be in the past eight years.
• Q-tech issued a profit warning on the Hong Kong Stock Exchange in January, showing its net profit in 2023 will be approximately RMB 93 million to 110 million, a 35% to 45% year-on-year decrease caused by a 12.3% year-on-year decrease in delivery.

DEMAND COMMENTARY

• Global smartphone market demand continues to be weak, industry competition fierce, and smartphone cameras continue to show a trend of downgrading specifications and configurations, increasing pressure on the average selling price and gross profit margin of mobile phone lenses and camera modules.
• It is reported that although the demand structure for mid to low-end Android phones has not improved significantly after the inventory replenishment ended in January, demand for high-end mobile phones remains strong. This trend is extremely beneficial to leading high-end lens manufacturers like Largan.
• The global Automotive Lens market size was valued at USD 1.7 billion in 2023. With growing demand in downstream applications, the Automotive Lens market is forecasted to be USD 4.6 billion by 2030 with a CAGR of 15.5%. Global core automotive lens manufacturers include Sunny Optical Technology, Sekonix, Nidec Sankyo, etc. Sunny holds a share of ~40%. Asia-Pacific is the largest market, with a share of ~52%, while Europe's share is ~22%, and North America's share is ~19%. Regarding products, the rear/surround view lens is the largest segment, with a share of over 65%, and the largest application is for passenger cars.
• The intellectualization of automobiles has greatly driven the increase in the number of on-board vehicle cameras. The earliest car camera usage is generally about three units per vehicle. The average number of vehicle cameras will reach 6.5 units in 2025.

SUPPLY ANALYSIS

• Overall, suppliers' capacity is surplus; the supply is stable, and the standard lead time for the optical lens is ~16 weeks (raw material ~12 weeks + 4 weeks processing) 
• Top 10 global mobile phone camera module manufacturers in 2023 (ranking by shipment): Sunny, Q-Tech, Ofilm, Foxconn, SunWin, C&T, Shinetech, Truly, AAC, Holitech
• Top 10 global mobile phone lens manufacturers in 2023 (ranking by comprehensive strength): Largan, Sunny, AAC, GESO, ZET, LCE, Ofilm, SYP, Huaxin, Dule
• Top 10 global Automotive lens manufacturers in 2023 (ranking by comprehensive strength): Sunny, LCE, Ofilm, Hitachi, Sekonix, Trace Optical, YTJZ, Sunex, Nidec, SIRTEC

PRICING SITUATION

• Optical glass raw material prices increase year by year.
  • They were CNY 90,000 per ton in 2022 and CNY 91,600 per ton in 2023, a 2% increase. Optical resin for plastic lenses is largely supplied by Japanese brands (Mitsui Chemicals, Osaka Chemics, etc.), and prices have increased due to increased labor costs, freight costs, handling, and trade and traffic issues. 
• To overcome the economic downturn after COVID-19, the strategy for most optical suppliers was to cut investment and capacity, so the total production reduced comparatively; it was estimated that the market price would rebound, return to normal levels as previously, and remain relatively stable in 2024.
• The technology-driven market will keep the price high for ADAS (Advanced Driver Assistance Systems) cameras; for display cameras, price depreciation will be compensated by volume.
  • After fierce competition, there is little margin for two-megapixel cameras, but it keeps a high margin for eight-megapixel cameras.

KEY TAKEAWAYS

• The Optical Lens market price was estimated to return to normal levels and remain relatively stable in 2024.
• Global geopolitical challenges and market uncertainties are prompting optical lens suppliers to diversify their supply chains. Some vendors have been setting up plants outside China, with Mexico and Vietnam as their first options.