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Camera phones mean business

By Therese Poletti
Knight Ridder Newspapers

GARY REYES / SAN JOSE MERCURY NEWS Eve Baron, a real-estate assistant, uses a camera cellphone to photograph the living room of a home for sale in San Francisco. The business world has embraced camera phones, adding to the demand for chips used in such applications.

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Her phone also comes in handy during home inspections when she spots potential problems. "I photograph all the points, so when I go back and write up my inspection, I have it in my phone. ... It gives you that one extra thing that you have that perhaps other agents don't have," said Barron.

Camera phones are not just for teenagers and tourists any more. What started in Japan as a fad has now become a must-have feature for many buyers of new cellphones, including business people. And the chip makers that develop the image sensors used in the devices hope to grab a piece of the ever-growing camera-phone pie.

"When these phones were first introduced, I thought it was a dumb idea," said Shyam Nagrani, a consumer-electronics analyst with iSuppli, a market-research company. "But now you are seeing some really interesting uses. ... There are a lot of professional uses."

News-gathering tool

Last year, for instance, the BBC gave its London reporters video camera phones so they can record brief video news clips if they don't have a camera crew with them.

"Their view is that a poor video is better than none at all when you can beat your competition," said Alan Reiter, president of Wireless Internet and Mobile Computing, a consulting company in Chevy Chase, Md.

Byron Riffenberg, a mechanical engineer with Air Systems in San Jose, said he uses his Palm Zire 71 handheld device to take photos of clients' sites. Air Systems installs heating and air-conditioning systems at Silicon Valley companies; Riffenberg brings the photos back to his office to jog his memory when he is describing a job to colleagues.

"It probably saves me a couple of hours a week," said Riffenberg. "If I forget to look at something and I have a picture of it, I can look at the pictures and I don't have to go back to the site."

This year, sales of camera phones are outpacing digital cameras, with 100 million of the phones expected to be sold vs. 20 million digital cameras.

Impact on chip makers
 
So it's no surprise that sales of the image-sensor chips that turn a cellphone into a camera phone are soaring, as well.

Chip sales will grow at an average rate of 23.7 percent over the next four years, estimated iSuppli's Nagrani. He said camera-phone chips could be the fastest-growing segment of the semiconductor industry in the next few years.

Still, camera phones' usefulness as a business tool remains limited by the low quality of the photos they take. Riffenberg and other camera-phone aficionados said the photos don't make the grade for client proposals or other important documents.

Riffenberg noted that other technicians at his company usually use digital cameras for photos that need to have higher resolution. Insurance adjusters, too, prefer to use digital cameras and download photos into a notebook computer.

But as chip makers keep improving image-sensor chips, the quality of camera-phone photos will begin to approach those taken by megapixel digital cameras.

In the United States, camera phones that take photos with 1.3 megapixel resolution are just starting to come on the market. In Japan and South Korea, however, companies sell 3-megapixel phones that take photos closer in quality to digital cameras.

As the market heats up, some chip makers are looking to buy their way into the business.

In June, Cypress Semiconductor of San Jose spent $100 million to buy FillFactory, a Belgian company that develops high-performance sensor chips.

Micron Technologies of Boise, Idaho, acquired Photobit for $50 million in 2002. A small company spun out of Pasadena's Jet Propulsion Laboratories, Photobit is becoming a player in the market.

"We believe that cameras are going to be the next thing that are going to become very prevalent in cellphones," said Cypress CEO T.J. Rodgers. "Anything that goes into cellphones is going to be high volume and the winner will be the company that can manufacture high volumes at low cost."

Rodgers intends to bring Cypress' high-volume manufacturing capabilities to FillFactory, which has developed high-end sensor chips used in professional cameras, mammography equipment and satellites. Cypress plans to continue to sell the higher-cost chips but it also will enable FillFactory to design lower-price image sensors that can be produced in big volumes.

Other chip makers are looking at the camera-phone chip market and there is no shortage of startups to choose from, said David Creamer, a managing director of Broadview Jeffries, a technology-focused investment banking company.

"In the next few years, it will be increasingly difficult to find a phone without a camera," said Reiter, the wireless analyst. "And once we start getting the 2- and 3-megapixel camera phones, that's going to start eating into the high end of the digital-camera market."

Nels Nelson, a project manager at construction company Engineered Structures in Boise, said he thinks camera phones are the wave of the future.

His company has given a few project supervisors out in the field camera phones so they can e-mail daily updates on construction sites to managers at headquarters.

"I can come in every morning and log on and view a project in central Washington and one in Phoenix," Nelson said, adding that the other supervisors have been using digital cameras to send their reports via laptop computers.

"Instead of having to carry two tools, a cellphone and a camera, they can carry one," he said.

"It makes communications on a project that is a long ways away seem like it's in the same town."