Huachuang Securities: In the era of AI + technological advances, the CMOS, the "heart" of information collection, is poised to make great strides.

Huachuang Securities has released a research report stating that CMOS image sensors are the core components of camera modules, playing a crucial role in the light perception and image quality of cameras. Under the AI wave, domestic mobile phone CMOS image sensors have great potential for upgrading the main camera/good pixel secondary camera, and multi-spectral CIS is expected to bring incremental new demand. The pixel enhancement trend in the automotive and security camera fields is significant, potentially driving up the volume and price of CIS. Sony and Samsung may slow down the expansion of their CMOS business, while domestic manufacturers have a wide product layout and smooth introduction process, potentially accelerating the domestic substitution process. Huachuang Securities' main points are as follows: CMOS image sensors: optical core components, with overseas manufacturers holding the majority share. CMOS image sensors are the core components of camera modules, with a critical impact on the light perception and image quality of cameras. From the demand side, as a core component of cameras, smartphones are the main application end downstream for CMOS, accounting for over 60% of the CMOS market size, and in terms of growth, the demand for CMOS in the automotive and security fields is growing rapidly, with various downstream application areas expected to drive up CMOS shipments and value. From the supply side, Sony and Samsung together hold over 60% of the global CMOS market share, while domestic manufacturers started later. With the further penetration of domestic CMOS image sensor suppliers and products, smartphone brands are expected to gradually switch to domestic suppliers, potentially promoting the rise of domestic manufacturers. AI consumer electronics terminals: significant potential for upgrading the main camera/good pixel secondary camera, with AI glasses bringing incremental demand for CIS. The development direction of CIS is high pixel/high frame rate/high imaging effect, with early multi-camera & pixel enhancements leading to the rapid growth of CMOS image sensors. Currently, there is a certain technological differentiation in the main camera configuration, with the number of cameras and main camera pixels of domestic Android manufacturers remaining stable. Flagship models maintain a single machine with four cameras and a 50MP main camera, with the main direction of CMOS sensor upgrades being an increase in sensor size, which significantly contributes to image quality. Different from domestic Android manufacturers, Samsung adopts a route of ultra-high pixel, with ISOCELL technology creating 200 million ultra-high pixels. In terms of the upgrade trend of secondary cameras, video quality is highly related to the performance of image sensors, with real-time shooting requirements for secondary camera performance. The Huawei Mate70 was first launched with a multi-spectral camera, which captures environmental spectra to restore colors, potentially driving new demand for CIS. For smartphones, the imaging configurations of some flagship models of major smartphone brands have been sorted out to provide some inspiration and reference for the future direction of smartphone CMOS sensors. In addition to smartphones, recent new AI glasses products have emerged, and the development and popularization of AI glasses are expected to bring incremental demand for CIS. AI smart driving: significant pixel enhancement trend, demand growth driving up volume and price. Automotive and security are currently the application areas with fast-growing demand for CMOS image sensors. In recent years, the rapid increase in the penetration rate of self-driving cars has made cameras a key visual center due to various advantages. The upgrading of autonomous driving promotes the enhancement of functions and pixels, and it is expected that the future shipments and market size of automotive CIS will steadily increase. In terms of shipments, the upgrade of smart driving and interior monitoring drives the demand for multiple cameras per car, with the number of cameras per car continuously increasing. In terms of the value of a single camera, the pixel requirements for automotive cameras are increasing, and automotive products have entered the era of 8 million pixels, with the enhancement of camera pixels expected to drive up the value of a single camera steadily. For the security and machine vision fields, the realization of functions requires high-definition images, and there is a significant trend towards high resolution/night vision/stereoscopic vision. For machine vision, there is a demand for high-speed scene shooting, with the necessity of global shutter technology increasing, which is expected to drive up incremental demand for CIS. Sony and Samsung may slow down the expansion of their CMOS business, while domestic manufacturers are expected to accelerate the domestic substitution process. In May 2024, Sony announced a reduction in capital spending expectations for its CIS division, with a focus on improving investment efficiency in the future. The yield of new CMOS image sensors for Sony mobile devices in the 2023 fiscal year is the company's primary concern, and due to the decline in sales of mobile image sensors, Sony has reduced its performance expectations for the FY24 CIS division. Samsung's technology reserves for 50MP large sensors are relatively lacking, and in recent years, Samsung has focused on research and expansion in HBM to cope with the AI era, so Samsung Electronics may have more strategic emphasis on the storage business. Therefore, Huachuang Securities believes that, with Sony and Samsung shifting their strategic focus, the trend towards high-end domestic CIS is unstoppable. In the mobile business, domestic manufacturers have successively launched new 50MP main camera products, with the smooth progress of the introduction of mid-to-high-end 50MP new products, and all manufacturers' smartphone CMOS shipments in 24H1 have achieved a substantial year-on-year growth. In the automotive and security fields, domestic manufacturers have also made extensive product layouts and market share expansion, potentially accelerating the domestic substitution process. Recommended targets to watch: Will Semiconductor (603501.SH), GalaxyCore Inc. (688728.SH), Sitewell Technology (688213.SH), China Wafer Level CSP (603005.SH). Risk warning: Downstream demand is lower than expected, the process of domestication of CIS chips is slower than expected, technological innovation and the progress of downstream terminal product iteration are slower than expected, and the risk of CMOS image sensor price decline.