Driven by over-optimism toward the market in the beginning of 2004, Taiwanese DSC (Digital Still Camera) makers aggressively expanded production facilities. However, with high penetration rates throughout the world -- 35% in Western Europe, 44% in North America, 58% in Japan -- market demand failed to take hold in the first half and brand-name players remained slow to outsource, together leading to intense competition among Taiwanese makers as they competed for orders. In the second half some makers decided to exit or shift to other businesses. As a result, Taiwanese DSC shipment volume reached approximately 55.5 million units in the fourth quarter of 2004, sliding 6.6% sequentially and climbing 12.7% year-on-year. Fourth-quarter shipment value exceeded US$506 million, registering a 7.8% decline sequentially and 8.4% growth year-on-year.

In the fourth quarter, despite enhancements in DSC specifications, Taiwanese makers aggressively reduced prices in competition for orders, thus further driving down DSC ASP (Average Selling Price). ASP stood at US$91.2.

Share of 4MP (Megapixel) DSC shipments broke the 30% level, while 5MP models garnered a similar share, evidence that the trend toward higher resolutions was expedited by market competition and reduced life cycles. Additionally, rollouts of high-resolution models adopting CMOS (Complementary Metal-Oxide Semiconductor) image sensors were delayed. CCD (Charged Couple Device) DSC offerings thus made up the bulk of total DCS shipments, accounting for 86.9% of Taiwanese shipments in the fourth quarter.

The outlook for the first quarter of 2005 appears subdued as a result of various factors such as weakening demand and heated competition in the industry. However, orders are expected to grow as Taiwanese DSC makers continue to make progress in technological capabilities, and some second-tier Japanese players are expected to outsource production as they come under pressure from price reductions in the end market. Shipment fluctuations will thus be quite mild in the first quarter of 2005. Coupled with seasonal effects, Taiwanese DSC shipment volume is expected to reach approximately five million units, dropping 10.6% sequentially yet rising 12.2% year-on-year.

Market Intelligence Center, based in Taipei, Taiwan, was founded in 1987. MIC is Taiwan's premier IT industry research and consulting firm providing intelligence, in-depth analysis, and strategic consulting services on global IT product and technology trends, focusing on markets and industries in Asia-Pacific. MIC is part of the Institute for Information Industry. https://mic.iii.org.tw/english