In the 20th century, the giant of photography was Kodak. In 1976, Kodak sold 90 percent of the photographic film in the US and 85 percent of the cameras; 10 years later it still employed 145,000 people. All cameras used photographic film in those days, most of them used Kodak. In 1975, Kodak invented the digital sensor, and over the next 35 years, lost the entire marketplace that it once dominated, to digital competitors. The company that has taken Kodak’s place as the essential element in almost every camera, no matter who you buy it from, is Sony. How did Sony become the Kodak of the 21st century?
Film to digital
In the glory days of the camera market before the onset of the digital revolution, being a camera manufacturer required two core competencies. The first was miniaturized precision engineering for the shutter and and body construction, and the second was lens design and manufacture. The role of today’s camera sensor was played by 35mm or larger film and that was the domain of two or three large chemical companies like Kodak and Fujifilm who both defined the format and the performance characteristics.
In 1975, Steve Sasson invented the digital camera while working at Kodak. This first digital camera weighed 8 pounds (3.6kg), could only take 0.01 megapixel (10,000 pixel) black & white photos, and storing 30 photos on a removable digital magnetic tape cassette. It was not, to put in mildly, a compact device.
The first commercial consumer compact digital camera, The Kodak-manufactured QuickTake 100 was introduced in 1994 by Apple, and from 1999 there was an explosion in digital camera sales. By 2005, the entire film marketplace was dead, and digital had fully taken over. Ironically Apple was a pioneer in a market they later helped to equally devastate.
The replacement of film emulsions with digital sensors pushed camera manufacturers into an area where they had few skills. Manufacturing camera sensors is a purely electronic design and fabrication issue. And the economics of electronics fabrication are a world away from that of lens manufacture. Initially, each manufacturer made its own sensor chips. But just as in the PC industry a couple of decades before, it turned out that the costs of building a fabrication plant were very high and could only be amortized by high-volume sales, or high camera prices.
Initially, the industry went for high prices, but in the early 2000s Canon, the biggest and best funded of all the camera manufacturers decided to move to volume and take out the competition. In 2003 they introduced the ground-breaking Canon Digital Rebel 300D. This was a true digital SLR at the unheard of price of $899 or $999 including a system lens. This was an astonishingly low price for such a sophisticated camera, and I bought one immediately, as well as a bunch of Canon EOS lenses.
Canon was successful in landing a heavy blow on the competition, but they opened the door to commoditisation of digital cameras at both the low and high end. Increasing competition in the market gradually drove prices down. A steady increase in unit sales meant that for all manufacturers there was initially sufficient volume to enable new investments in electronic fabrication facilities. But there was deep trouble brewing.
The death of the digital compact
The seeds of the destruction of the digital compact camera were laid even before the introduction of the Apple QuickTake 100. The 1993 IBM Simon is generally considered to be the first “smart phone.” It could function as a phone, pager, and PDA (personal desktop assistant) , with simple applications for calendar, calculator, and address book, but no built-in camera. The important feature of the smart phone was its ability to run various applications to expand its functionality. With unerring accuracy, IBM invented and then gave away the keys to the future digital revolution, as it has done so many times in the past.
Basic phones and smartphones that had rear facing cameras started to arrive in 2000, with the addition of front-facing cameras from 2003. Then in 2007, something happened that mainstream camera manufacturers took almost no notice of, the introduction of the Apple iPhone. The absolutely atomic explosion of smartphone sales from that point presaged the economic collapse of the huge digital camera business. In 2010 the digital camera marketplace reached its peak, but then sales collapsed over the next 10 years. At its peak in 2010, 121 million digital cameras were sold. In 2018 the market was just 19 million, and in 2019 15 million.
Enter the dragon
Sony has long been a manufacturer of image sensors. Research and development work started in earnest in 1973 on CCD (charge coupled) image sensors which was the latest and best technology. Most of these were used in industrial applications but their first consumer camera based on this, the CyberShot F1, came out in 1996, and a long series of innovative compact cameras followed. However it soon became clear that for consumer and professional image and video applications, CCD technology was not a good fit because of its relatively low speed and high noise. CMOS, an emerging technology which had actually been invented in 1963 looked much more promising. In 1996, Sony started to invest heavily in research and development for CMOS sensors. Their first commercial Sony CMOS sensor chip was delivered in 2000, and from 2002 onwards they supplied Nikon with sensors for the majority of their low-end and mid-range digital SLR cameras.
Initially, Sony was focused on the OEM and compact camera market, but they started to eye up the more profitable DSLR and systems camera business. In 2006, Sony bought the camera business of Minolta, as a quick way to step into the high margin parts of that market. Minolta was the inventor of the modern integrated autofocus single-lens reflex (SLR) camera, but was the last of the major vendors to introduce a digital version, and it cost them dearly. The first Sony branded DSLR, the Alpha A100 , came in June 2006. Between 2006 and 2008 Sony was the fastest growing company on the DSLR market, reaching 13% market share in 2008 to become the third largest DSLR company in the world. But growth stalled at that point as competition with Nikon and Canon in particular heated up.
Meanwhile, elsewhere in the market Olympus and Panasonic in 2008 created a bold new vision for the modern digital camera. They did away with the complex optical mirror and prism system of the single lens reflex camera and go fully electronic, viewing the image only via an electronic viewfinder or LCD screen. This new style of building cameras was called “mirrorless”, and while the early versions were not as powerful as DSLRs, the technology showed great promise.
In 2010, Sony introduced the first of an epoch-making line of digital cameras, the NEX 3, and NEX 5, and along with it a new sensor and lens mount. These were full mirrorless cameras, and the closest yet to achieving high-quality results with a fully electronic camera design. I immediately bought a NEX 5 and then the NEX 7, because It was blindingly clear to me which way the market was going.
In 2013 Sony again stunned the photography world by introducing the first professional quality full frame digital mirrorless camera, the Alpha A7, and in the process rebranded the mirrorless cameras back to the Alpha name. Over the past 7 years Sony has accelerated development of its sensor and camera technology along with its professional lens line-up and has taken the mirrorless camera to technology leadership over DSLRs in every single domain of professional photography and video.
In the early 2000s, camera sensor manufacturing was done by Sony, Canon, Nikon, Fuji, Panasonic, Toshiba, Samsung, and Aptina amongst others. Almost every major camera manufacturer had some level of sensor production, even if they subcontracted the specialist sensor layers out to silicon foundries. In 2015, Toshiba, after a major corporate accounting scandal, threw in the towel, and sold their sensor manufacturing business to Sony. In 2017, Samsung exited the digital camera business (but stayed in smartphone cameras). In 2019, Panasonic closed its sensor manufacturing plant. Aptina, which produced small sensors for Nikon’s own first foray into the world of digital cameras (the Nikon 1 range), could not keep up. So today in 2020, OEM sensor manufacturing for digital cameras is dominated by Sony, and only Canon still produces its own high-end camera sensors. But what is killing the ability of any camera vendor to strike back is the growth in smartphone, automotive, and security image sensors, which absolutely dwarf the camera sensor business.
The tiny black bar in the chart above, is the camera business. In 2018 and 2019, Sony had a 50% share across the whole of this market (reduced to 44% in 1H2020 because of increased competition from Samsung, and a Covid influenced decline in smartphone sales). There is not the slightest chance that a camera-only supplier can afford the level of investment to outrun Sony in digital sensors.
Sony has therefore created an almost complete lock on the digital sensor marketplace. It has taken over Kodak’s role as the company that dominates the recording of light in camera systems.