at 1: 00 a.m. Beijing time on September 13, 2023, apple held a 2023 autumn new product launch to release the new iPhone 15 series. In this upgrade, the optical upgrade is a highlight: the 15/15 Plus rear main camera is upgraded from 12MP to 48MP; The 15 Pro/15 Pro Max rear main camera adopts 48MP, and the telephoto sub-camera adopts quadruple reflection prism design. According to information from TrendForce and other authoritative organizations, the main camera CIS of some models of Apple iPhone 15 series uses Sony's three-layer stack scheme. As the yield of the three-layer stack scheme is lower than that of the traditional scheme (two-layer stack) and a wafer bonding is required, the new main camera will occupy more Sony CIS wafer capacity. We believe that Sony to protect the background of Apple, CIS production capacity tends to be tight, Android brand high-end CIS demand is expected to partially shift to domestic suppliers, optimistic about Weir shares, Stway as the representative of the manufacturers from 23H2 to accelerate domestic substitution.

CMOS image sensor (CIS) three-layer program is what compared to the traditional stack structure, double-layer transistor pixel stack will achieve photoelectric signal conversion of the photodiode and the control signal of the pixel transistor layer separation to different substrates, superimposed data processing layer to build a three-layer stack structure. Its main advantages are: 1) expanding the capacity of the photodiode and increasing the saturation signal amount (Full-Well Capacity,FWC) to about twice the original, successfully expanding the dynamic range representing the imageable light and dark difference range; 2) The pixel transistors such as the reset transistor (RST), the selection transistor (SEL), and the amplification transistor (AMP) other than the transmission control transistor (TRG) are distributed on the substrate layer without the photodiode, so that the size of the amplification transistor is increased, so that the noise easily generated when shooting a dark scene such as a night scene is significantly reduced. From the perspective of structure and process, according to TechInsights analysis, double-layer pixels need one bonding (oxide bonding), and pixel layer and digital layer need one bonding, so three-layer stack needs two bonding, which greatly increases the wafer area consumed. In addition, the CIS yield of the three-layer stack process is significantly lower than that of mature CIS products, which also increases the actual consumption of wafers to a certain extent.

what is the current capacity structure of Sony? Sony CIS currently presents the production structure of pixel layer "self-supply + outsourcing" and digital layer "outsourcing. According to Sony's financial report, the company's CIS production capacity is about 1.551 million pieces in 2022, with an average monthly production capacity of 129000 pieces (based on 300mm wafers). From the perspective of revenue structure, 82% of the company's image sensor revenue comes from the mobile side. We estimate that about 80% of the company's wafer production capacity is used for the mobile side, that is, about 1.24 million wafers are used for the production of CIS pixel layer of smart phones throughout the year. At present, Sony is the exclusive supplier of the full range of CIS for Apple's iPhone, supplying all CIS including front camera and back camera. We estimate that in 2022, each model of Apple will need to use about 510000 equivalent 300mm wafers from Sony, accounting for about 41% of Sony's total wafer capacity, of which the demand for iPhone 14 main camera CIS wafers will account for about 21% of Apple's total demand in that year.

Apple's new machine optical upgrade generated by the incremental demand? We iPhone15 whether each series of models using three-layer stacking scheme were conservative, neutral, optimistic assumptions,(1) conservative assumptions: iPhone15/15 Plus main CIS using 48MP three-layer stacking scheme, 15 Pro/Max main CIS using 48MP double-layer stacking scheme. It is estimated that the 2023H2 iPhone 15 new camera uses Sony's 160000 equivalent 300mm wafers, an increase of about 50000 wafers over the 14 series, and an increase of about 10% over Apple's overall capacity demand in 2022. (2) Neutral assumption: The iPhone 15/15 Plus main camera CIS uses a 48MP two-layer stack scheme, and the 15 Pro/Pro Max main camera CIS uses a 48MP three-layer stack scheme. It is estimated that the 2023H2 iPhone 15 new camera uses Sony's 230000 equivalent 300mm wafers, an increase of about 130000 wafers over the 14 series, and an increase of about 25% over Apple's overall capacity demand in 2022. (3) Optimistic assumption: The iPhone 15 full-range master CIS uses a 48MP three-tier stack solution. It is estimated that the iPhone 15 new camera uses Sony's 280000 equivalent 300mm wafers, an increase of about 170000 wafers over the 14 series, and an increase of about 34% over Apple's overall capacity demand in 2022.

risk factors: the risk of large customers self-developed image sensors, increased market competition, product shipments recovery is not as expected, the risk of continued decline in product prices, the risk of outsourcing processing, the risk of technology iteration.

investment strategy: we believe that from the perspective of product iteration, the new iPhone will further strengthen the upgrade route of CIS "large sensor size, large pixel" for high-end models of smart phones, and promote the upgrade iteration of various manufacturers. From the perspective of supply chain, Sony's use of three-layer stacking process to supply customers a will occupy more wafer capacity, and Android will be affected to a certain extent, domestic image sensor manufacturers are expected to seize the window period to accelerate the introduction of high-end products to end brand manufacturers. We recommend the layout of the OV50 series of high-end CIS domestic image sensor leader Weir shares (603501.SH), power smartphone high-end product line of Stway (688213.SH), recommended to focus on Gecowei (688728.SH).