- Gross margin compression from increasing pricing pressure.
- Accelerating competition in the 8 MP non-Apple smartphone market.
As for gross margins, Gill writes that he cut his FY 2012 estimate to 28.4% from 30.1%, with FY 2013 now estimated at 26.6%, down from 30.4%. The analyst notes that in the current quarter he expects OmniVision to take an inventory charge due to "poor yields" and excess wafers at TSMC.
The analyst writes: "While OVTI initially had the technological lead in backside illumination (BSI) for over two years, we believe that gap has narrowed significantly due to OVTI’s internal design/production issues (i.e. 8830 sensor) and competitors catching up."