With the mainstream resolution of phone cameras gradually rising from VGA to more than one megapixel, Taiwan digital-camera makers say they are worried that demand for their products will be replaced by demand for camera phones.

Japan-based Techno Systems Research (TSR) forecasts that global demand for digital cameras in 2005 will grow 29.5% on year to 64 million units, while demand for camera phones will rise 139% to 132 million units. However, last year JP Morgan projected global digital-camera demand would reach 83.4 million units in 2005. The financial firm has since adjusted its projection downwards, to a figure closer to TSR?s forecast, due to the explosive growth of camera phones.

In addition, Taiwan DSC makers are expected to suffer a drop in OEM orders from leading Japan-based brands. The total annual production capacity of the Japan companies will increase to an estimated 60 million DSCs in 2005, not much less than the global demand projected by TSR, the makers noted.

To cope with the unfavorable situation, some Taiwan digital-camera producers have been developing pocket digital video camcorders (DVs). However, since almost all CCD technology is controlled by Japan-based digital-camera makers, Taiwan makers face considerable barriers.