By Michael Kanellos
Staff Writer, CNET News.com
February 3, 2005 4:00 AM PST

His mistake occurred as he left the building of the major British bank he had just held up and took off his mask. The reflected glare from the door ordinarily would have washed out the scene--but security cameras using Pixim's sensors, designed to work in poor lighting conditions, captured a facial image that led to an arrest.

Since then, cameras containing the chip technology are mandatory for contractors bidding for retrofit work at that bank's branches, said Lee Hirsch, Pixim's vice president of marketing.

Digital photography could become one of the next big opportunities for the chip industry, at least according to companies that want to bring PC-style economics to the camera industry. Their goal: Become the Intel, or at least the Advanced Micro Devices, of photography.

"We're fighting the processor wars all over again," said Gary Baum, senior vice president of NuCore Technology, which makes the CleanCapture image processors for video and still cameras from JVC, Kyocera and others. "Remember the mid-'80s? PCs cost $5,000, and everybody made their own chipsets. Then the price wars hit."

The push into photography derives in part from its booming growth. Shipments of digital still cameras grew from 46.4 million in 2003 to 62 million in 2004--a 33.6 percent increase, according to industry researcher iSuppli. And phone makers will include multi-megapixel cameras and video features in the bulk of their models over the next two years.

An even more ambitious type of product is planned for the end of this year and next: a new breed of hybrid camera that can capture full-motion video and high-resolution photos at the same time, without the user having to toggle back and forth between different function modes.

Complicated market forces, however, are already presenting as many obstacles as opportunities. Declining prices mean that camera makers need to cut down the cost of designing cameras.

Unfortunately, chip design costs are escalating, putting manufacturers in a bind--particularly Japanese ones, which often prefer their own silicon. Sony, for instance, uses only internally made image processors and sensors in its cameras, a representative said in an e-mail.

NuCore's technology is
designed to sharpen
images.

Despite this marked preference for in-house processors among some large camera makers, the market for third-party chips is growing. Although only about 20 percent of digital cameras in 2004 contained image processors from third-party manufacturers, that number is up from 10 percent the year before, said Kanika Ferrell, U.S. marketing manager at Texas Instruments' digital-camera unit.

Kodak and Hewlett-Packard use TI chips extensively in their cameras, she said, while Olympus and Panasonic have picked up the company's chips for select models. Texas Instruments is also trying to persuade cell phone makers that use TI chips in handsets to pick up camera chips as well. Canesta and Zoran are mining this field, too.

In an effort to avoid commoditization in this crowded market, camera makers are also adding layers of software to differentiate their products from the pack, even if they use the same chip as their competitors do. Hewlett-Packard's 2004 cameras, for example, included red-eye reduction and technology that compensates for harsh changes in lighting, said David Ryan, the company's director of marketing for cameras worldwide.

"The HP algorithms are exclusive to HP," he said. "There is plenty of room for innovation."

A peek behind the lens
A digital camera essentially consists of four basic parts: a lens; an image sensor that captures light through its pixels; an analog-to-digital (A-to-D) converter; and an image processor that filters and polishes the converted data into a coherent, crisp image that can be stored, displayed or printed.

Each component faces its own limitations. Shrinking the size of the lens to reduce overall camera size lessens the amount of light hitting the sensor, thereby hampering image quality.

To compensate, manufacturers increase the number of pixels on the sensor. But squeezing more pixels into a sensor reduces pixel size, which, in turn, can