As May draws to a close, the highly anticipated 618 shopping festival is about to commence, with consumer electronics traditionally taking center stage across major e-commerce platforms.

This year, the continued surge in popularity of short videos and vlogs has accelerated the trend of 'everyone being a creator,' transforming the handheld imaging industry into a fiercely competitive battleground. According to public reports and official announcements, manufacturers such as vivo, Insta360, OPPO, and Honor are either planning or have already launched gimbal camera products.

Among these, Insta360 has taken the lead as the first entrant this year to unveil a product. The newly announced Luna Ultra is positioned as a premium offering, boasting cutting-edge features like a detachable split-screen and a 1-inch sensor...

Coupled with a marketing campaign that began building anticipation in April, the company's substantial investment in promotion underscores the product's significance at all levels.

Delving deeper, Insta360, a consumer electronics company primarily focused on the niche market of panoramic cameras, must introduce new products to define its second growth trajectory just one year after going public.

Technology vs. Profits: The Urgent Dilemma for Consumer Electronics Companies

Insta360 recently released its first annual report since going public, revealing that its 2025 revenue reached a new peak, growing 74.76% year-on-year to RMB 9.741 billion. However, its annual R&D expenses surged by 96.95%, leading to a 20.70% year-on-year decline in total profits to RMB 840 million.

The situation did not improve in the first quarter of 2026, with revenue growing 83.11% year-on-year but total profits plummeting by 79.35%.

Insta360's anxiety stems from the fact that its high-end products, developed with substantial R&D investment, have failed to yield higher profits.

In essence, R&D has not created a genuine competitive moat.

Of course, some argue that Insta360's R&D achievements are yet to be fully realized and that short-term profit losses are insignificant.

Objectively, in the consumer electronics sector, technological investment is indeed a vital component of a company's competitive moat, and sacrificing short-term profits is not unacceptable.

Over the past few years, Insta360 has secured numerous industry patents through significant R&D investment. The 2025 annual report shows that Insta360 held a substantial number of domestic and international patents, with 1,120 authorized patents (excluding software copyrights) by the end of 2025.

However, not all patents are created equal, and the barriers they create vary significantly. Let's first assess the quality of Insta360's technological barriers.

From its patent portfolio, it is evident that Insta360's R&D investment and strategy heavily favor application improvements and defensive strategies.

Among its 1,120 authorized patents, 859 are design and utility model patents with narrow protection scopes and are easily circumvented, accounting for about 76.7%. In contrast, invention patents, which truly reflect original technological accumulation, number only 261, or 23.3%.

It should be noted that under China's patent law, the three types of patents differ significantly in protection strength. Design patents only protect a product's appearance, not its technical solution, allowing competitors to bypass them with minor design changes. Utility model patents involve technical solutions but undergo only formal examination before authorization, lacking substantive review, making them less stable and more likely to be invalidated than invention patents. In other words, among Insta360's 1,120 authorized patents, those that can withstand substantive review and effectively compete against rivals in patent disputes may be closer to the 261 invention patents. Considering that many of these still belong to the application layer, the thickness of this core barrier is further diminished.

Even among these 261 invention patents, the majority focus on application-level technologies such as panoramic image stitching, handheld stabilization algorithms, distortion correction, multi-lens synchronization control, and body structure optimization.

These technologies do hold value; for instance, its stabilization technology addresses a core pain point of action cameras, and its panoramic stitching algorithm has established advantages in a niche market.

However, the true competitive barriers in the imaging equipment industry lie not in these application-level optimizations but in three foundational areas: sensor technology, optical design, and underlying AI algorithms.

Yet, core patents in these fields are almost entirely controlled by industry giants like Sony, Canon, Nikon, and Apple, which have decades of deep industry experience.

For example, Sony has been developing CCD and CMOS sensors since the 1970s and dominates the high-end imaging sensor market, likely holding over 70% share. Apple has built a dense web of foundational patents in computational photography algorithms, image processor architectures, and multi-frame synthesis.

These foundational patents are characterized by long development cycles, high investment, and formidable barriers, making them key determinants of industry technical standards and influence.

This is akin to the current boom in large language models (LLMs). While LLM companies offer impressive user experiences, their development speed and performance ceilings are ultimately dictated by companies owning hardware and software infrastructure like chips and CUDA.

However, the hardware gaps are difficult for Insta360, founded in 2015, to bridge quickly through mere financial or human resource investment. First, competitors have accumulated advantages over generations. Second, even if R&D yields results, foundational patent technologies are typically well-protected by law and hard to circumvent.

In other words, Insta360's patent strategy resembles 'decorating someone else's built house' rather than 'laying its own foundation.'

This situation raises a critical issue: Insta360's product iteration ceiling is largely beyond its control. Its application-layer performance depends on how advanced Sony's next-generation CMOS sensors are or how powerful Ambarella's next-gen chip computing power becomes. While it can excel in stabilization algorithms and stitching technology, foundational image sensor performance—dynamic range, signal-to-noise ratio, readout speed—which directly determines image quality limits, is beyond its reach. Any misalignment between core suppliers' iteration rhythms and Insta360's product cycles, or more directly, unfavorable priority adjustments in suppliers' capacity allocation, would directly weaken Insta360's competitiveness in the end market.

This structural flaw in technological barriers is becoming increasingly evident in the market. According to Jiuqian Data Center, the global handheld smart imaging device market grew 86% year-on-year in the first quarter of 2026, with DJI's market share further rising to 61%, indicating increasing industry concentration. While Insta360 remains second, its market share is under sustained pressure from leading brands.

In this context, Insta360's soaring and dispersed R&D investment since last year appears more as a defensive strategy to prevent further market share erosion.

The Essence of Competitive Moats: Industry Influence Driven by Scale

In consumer electronics, technology is indeed indispensable, and becoming a giant requires substantial R&D investment.

However, translating high R&D investment into high barriers requires three conditions: correct technological direction, sufficiently short R&D cycles, and adequate scale effects.

For Insta360: Technologically, the panoramic camera market is limited in size, while the new gimbal camera category is dominated by smartphone manufacturers like OPPO, vivo, and Honor, which leverage their supply chain and channel advantages from hundreds of millions of smartphone shipments—a dimension where Insta360 lacks a first-mover advantage. In terms of R&D cycles, high-end imaging sensor development typically spans five to ten years. Insta360, founded just over a decade ago and reliant on externally sourced core sensors and chips, is unlikely to achieve foundational self-research within this timeframe. Regarding scale effects, Insta360's annual shipments are orders of magnitude lower than industry leaders, making it difficult to amortize unit R&D and procurement costs. The profit pressure is fundamentally a scale issue, not merely an input-output efficiency problem. Together, these factors indicate that Insta360's current high R&D investment resembles 'catching up' in three directions simultaneously, with structural constraints in all three dimensions.

Simply put, isolated technological advantages rarely form barriers. Instead, a complete loop is needed: 'technology into products, products into scale, scale into supply chain bargaining power, and supply chain advantages feeding back into technological R&D.'

Once formed, this loop creates a powerful Matthew effect, making it difficult for latecomers to catch up.

Apple exemplifies this. While many attribute Apple's success to technological superiority, it is not always the industry leader in individual technologies, nor does its hardware significantly outperform domestic rivals.

Apple's true strength lies in its annual shipments of hundreds of millions of devices, granting it unparalleled supply chain bargaining power.

Apple's shipment scale ensures priority access to TSMC's advanced manufacturing processes for cutting-edge chips and, through deep collaboration with Sony, the ability to customize exclusive imaging sensors, procuring top-quality components at far lower costs than competitors. This supply chain advantage enables Apple to maintain over 40% gross margins while continuously investing in R&D to launch more competitive products.

Leading industry peers follow the same logic: leveraging scale advantages to integrate key technologies across the supply chain, from core component self-research to in-house production systems. Scale-driven supply chain advantages enable products to combine technological advancement with cost and quality benefits, extending these advantages to more categories.

In contrast, Insta360 faces significant disadvantages in this loop.

On the supply chain front, Insta360 relies 100% on Sony for core sensors, domestic manufacturers like Hongjing Optoelectronics for optical lenses, and third-party suppliers like Ambarella for chips.

Due to shipments far below leading brands, Insta360 has negligible bargaining power with suppliers and must passively accept their pricing and delivery schedules. In 2025, rising costs of upstream core components significantly increased Insta360's production costs, directly eroding profits.

More concerning is the supply security dimension. During extreme scenarios like chip shortages or geopolitical disruptions, core suppliers like Sony inevitably prioritize customers with larger shipment volumes—hundreds of millions of Apple devices and millions of units from leading drone manufacturers rank higher than Insta360's scale. Insta360 faces not only cost passivity but also structural vulnerability in supply guarantees under extreme supply chain pressure. This means current supply chain dependencies are not just profit issues but survival concerns.

Simply put, nurturing a unicorn into an industry giant in today's consumer electronics sector is no easy feat unless true breakthroughs in foundational technologies are achieved.

This means Insta360 faces not a simple choice between 'increasing R&D' or 'improving cost efficiency' but a more fundamental strategic decision: whether to accept the application-layer innovation ceiling under current scale constraints and concentrate R&D resources on a few areas with potential for differentiation—such as exploring uncharted territories at the intersection of panoramic stitching and computational photography—or to accelerate infrastructure gaps, like sensors and underlying computing power, through capital measures and industrial cooperation to fundamentally rewrite competition rules. Regardless of the path, the premise is acknowledging a fact: under the current industrial landscape, more 'decoration-level' R&D investment cannot answer growth questions.

This is a difficult and lengthy journey requiring long-term patience and sustained investment, with no obvious short-term returns. Yet, it is the only path to building irreplaceable competitive barriers and achieving long-term sustainable development.

The drums of the 618 promotion have sounded, and Luna Ultra's market performance will soon be revealed.

The 618 window is short, but the questions Insta360 must answer are long. Luna Ultra may prove the company can create a good product, but it cannot prove true pricing power or barriers in the industry. The factors that truly determine these outcomes are the long-term variables worthy of attention.