Tessera Technology (TSRA) , OVTI and MU

At this point, my only concern about OVTI's future is this company, I have been following it since before last ER, and made nice profit after ER.
After listening today's shareholder conference, I would suggest any serious OVTI investors to have a close look at this company, and our main focus is not MU, Samsung or Toshiba. It is Tessera.

I have explained OVTI's turning around will be depending on TSRA's technology. So far I have been focusing on the manufacturing yield benefit from TSRA's WLCSP techonology

Let's take a further look into future. We all know that TrueFocus is going to be a blockbuster for OVTI's business in 2008 and beyond. What does this have anything to do with TSRA?

TrueFocus is a camera system, OVTI has the expertises to design (and already did)two of the three components: the image sensor, and the image processor(DSP), so what is the missing part? It is easy to find out.
The optical part, the counterpart to the traditional lens. Why is this an issue?
The point is you want to make it cheap,really really cheap, make it small, and really really small and slim. So It needs TSRA's wafer level optical(WLO).

That is why OVTI needs TSRA, the reasons above arenot very obvious, however very important. In my mind, TSRA and TSMC are the two legs of OVTI, without any of them.it cannot walk and run let along flying high.

So far in this analysis, TSRA is OVTI's friend. and OVTI will be the first in the industry to enjoy the full benefit of TSRA's so called Wafer Level Camera Ecosystem.

However it is not that simple, since TSRA actually wants a piece of pie in the market OVTI, MU are fiercely fighting now by acquiring a small company called EyeSquad who develops software autofocus and zoom similar as TrueFocus. By doing so, TSRA has got all the important pieces to compete in the incoming market.

My educated impression is EyeSquad is not as good as WFC(TrueFocus), their technology is based on Fresnel lens, image quality compromise will be the #1 concern , and they don't really have the track record as OVTI in image sensor business, the best they can show now is a VGA module, and at that resolution you don't really need digital autofocus.

I have seen signs of benign relationship between OVTI and TSRA, especially in the process of adapting TSRA's WLCSP and WLO. However we really cannot overlook the issue of EyeSquad. TSRA is strong in the system to module level know-how in every aspect of this type of camera, once EyeSquad makes good progress to catch up, Tessera will be a formidable player in this field, and certainly a potential threats to OVTI.

What does this mean to our OVTI investors holding strong belief of the booming market? I would say sparing 20%-30% of funds you would like to pour in OVTI to get some TSRA shares. I believe both of them will do great in 2007. However it is just a matter of time for us to know who will be the final winner. If they can merge together, that will be THE company I feel comfortable putting 100% of my fund investing, however the world is not ideal. I cannot always get what I want.

BTW forget about MU in this market, up to date, they have no progress at all for digital autofocus to respond Truefocus, and they are not interested in adapting WLCSP and WLO to boost yield while getting smaller and slimmer camera modules, since doing that means more capital expenditure on their depreciated old Fabs, why would they do that if utilizing old Fabs is the sole reason for them to entering this market in the first place. To make things worse their chips are not selling well.

In MU's most recent CC in April, the recorded transcript reads:

"CMOS image sensors sales are down due to market share loss, shift to low-end phones in the market and pricing pressure. Image sensor market will remain challenging with current sensor inventory at MU over one quarter and it will take until the end of the fiscal year to work off."

So MU is not going to be the winner in the foreseeable future, simply because they don't have the right business model for the competition here in CIS market.

Update:

More info about where did WLO come from.

And very insightful comment from a forum post