Digicams: The Wolf in Cheap's Clothing

The image I snapped two days back, by the way, came from my new sub-$100 digicam. Part of the reason I went with Panasonic is because my friend Keith (who, appropriately, is at PMA right now…I decided to ‘pass’ on the show this year) has been so happy with his Lumix DMC-FX30 from the same manufacturer

I showed Keith my Lumix DMC-LS75 two weekends back in conjunction with a San Francisco Bay Area visit, and I was amused to watch his reaction. He’d spent a lot of time fiddling with his camera, figuring out which settings produced the best results in various scene conditions, and as he navigated my camera’s setting menus he quickly realized that his and mine were essentially identical in this respect.

They’re not completely identical, of course. His is 0.3" thinner, by virtue of its reliance on a proprietary battery versus two AAs in my case. The optics are different; his camera has a 3.6x Leica lens with 28mm wide angle end of the zoom range, while mine is a 3x Lumix-branded zoom lens with 35mm wide angle. And although his camera’s LCD is the same size as mine, it delivers almost twice the resolution. But if you compare the specs for the two cameras at a site like Digital Photography Review (DMC-LS75 and DMC-FX30), you’ll quickly conclude that they share a common heritage.

They contain the same image processing engine, and therefore offer identical light-sensitivity options, and identical image-capture speeds and modes (although I note that the DMC-FX30 offers a few more auto-focus options). They appear to use the same 7.2 Mpixel (effective) image sensor. They both offer optical image stabilization. They both embed 27 MBytes’ worth of flash memory for resident image storage, and they both tout SD and (thankfully) SDHC card support.

But one thing’s very much not identical; their respective price tags. The original MSRP of the DMC-LS75 was $149.99; as I pointed out a few weeks ago, it’s now selling for as low as $99.99. The DMC-FX30, conversely, had an original MSRP of $349.95, $200 higher. Granted, I saw it last week for $169.95 (now expired), but most retailers are still selling it for $249.99 or more.

The cost-effective DMC-LS75 is the beneficiary of unrelenting feature set improvement pressure, which supplier competition is fueling even in the absence of true market need (i.e. the ridiculous Mpixel race), and which is powering the digital photography market forward. And the just-announced successors to both cameras, the DMC-LS80 and DMC-FX35, predictably make further improvements in these specifications; higher still and video image capture resolutions, higher ISOs, next-generation image processors, wider zoom ranges, etc.

This Panasonic case study is reminiscent of the Syntax Olevia LCD TV one I showcased a bit over a month ago, and I see it over and over again in today’s highly commoditized consumer electronics market. Standardize most if not all of your product variants on a single fundamental hardware design, to leverage limited design resources and garner maximum volume cost advantage. Differentiate between models based on firmware-enabled secondary features, along with optics, LCD size/resolution and cosmetics (color, form factor, weight, etc). And hope that the combination of high-volume-but-low-margin at the low end, and low-volume-but-high-margin at the high end, is sufficient to ensure fiscal success at model year’s end.

For silicon suppliers, unfortunately, this story doesn’t usually have a good ending. Even at the low end, your customer (the camera manufacturer) expects to turn some profit. So, in a pattern DVD chipset suppliers (most of whom have exited the market by now) know intimately, you face remorseless downward price pressure. The design selection process is eventually framed by fractions of a penny-per-unit ASP differences between suppliers. And at some point, exemplified by Panasonic’s Venus Engine line, your former customer will terminate your business and instead hand over the design work to its internal semiconductor division.

Have I accurately (albeit pessimistically) captured the picture, chip manufacturers?