The mobile phone market in the Western World is considered to be mature. Most consumers possess one or more high- or mid-range camera 'phones and the sales volume is largely confined to "churn"; that is replacement before the end of the product life due to reasons of fashion, new features or new services.

Many of these handsets have two cameras, usually an outward-facing, high megapixel, camera for photography of still images and a lower resolution camera facing towards the user for video conferencing.

Early cell phones had very low resolution imagers, typically 0.1 mega pixels, and the picture quality was barely acceptable. Consequently, the imager resolution moved quickly from common intermediate format (CIF) to video graphics array (VGA). VGA provided three times the number of pixels as CIF and a very noticeable improvement in picture quality.

This cemented a firm perception for the majority of consumers that more pixels mean better image quality. This correlation was bolstered by mega pixels being a readily quantifiable metric that could be used for sales purposes. Consequently many consumers now expect the main camera on a mobile phone to be at least 2MPixel, with high end phones supporting resolutions up to 10Mpixel.

However, as can be seen from the data shown in Figure 1 below, this view ignores the much larger market comprising the rest of the World. In many societies where a wired telephone system has never been installed, a wireless infrastructure is often a better alternative for providing communications.

Figure 1. Population and mobile phone subscriber base in primary, secondary and tertiary markets. Source: Tessera

While cell phone volume growth is stagnating in Western markets it is burgeoning in the secondary and tertiary markets. China's Ministry of Information Industry announced on their website that the landmark of more than 500 million subscribers was passed in June of 2007.

But even with this vast number, which is growing by nearly 10 million per month, most Chinese still don't own a mobile phone. The current penetration rate is only 38 percent of China's 1.3 billion population, so there is plenty of scope for further growth. India is the second largest market behind China, with around 6 million new subscribers signing up each month.

Similarly, India is expected to exceed 500 million mobile phone users in 2010, its population being around 1.1 billion. A longer term market proposition is represented by Africa where only about 12% of the continents population of 1 billion are subscribers, grouped in a few countries. Expressed more starkly, the Western market represents a mere one sixth of the total addressable market.

Secondary and Tertiary Markets
Mobile phones for the secondary and tertiary markets are often manufactured and sold by indigenous companies with no international presence. Although the form factor is similar to handsets available from the Tier one manufacturers, the functionality is often limited to voice and text.

With such a limited range of functions the component count is low. Parts and assembly costs are therefore minimized. Each reduction in prices translates to affordability for more consumers and hence increase of total accessible market.

Indigenous companies also have an advantage over the larger, well-known phone manufacturers in that the handset interface and aesthetics can be tailored to domestic consumer tastes, where subtle differences can make or break a model. Consumers who cannot read or write, place much higher value on visual and verbal communication. This makes a camera an essential component of these base-level handsets.

The lower per-capita income in these geographic regions means handset demand is driven by cost, not features. In the more industrialized markets, the camera would be the highest possible resolution that the product could support.

However, in many of the newer markets consumers do not have access to personal computers. Thus, the vast majority of pictures captured by the camera are usually only viewed on the tiny cell phone screen. Even on a high-end phone, the screen is typically only 350 x 450 pixels, which falls somewhere between CIF and VGA resolution.

Most screens from low and mid-level phones have only one quarter of this resolution, meaning an image with greater detail simply cannot be displayed. If the pictures stay on the phone or are only sent to other phones, there is no benefit to having a camera with a resolution higher than VGA. Indeed, a conventional VGA camera is grossly over specified for this application.