Memory and CMOS image sensor manufacturer Micron Technology (NYSE:MU) announced a pair of new image sensors last week that are targeted at high-definition applications in digital cameras and camcorders. As consumers, we can certainly benefit from the new devices that will be built around such technology, but will we benefit as investors?

Micron has certainly benefited, because CMOS image sensors can be fabricated using equipment that is too old to manufacture competitive memory products. It's a sure bet that manufacturers like Micron and Samsung have a lot of this stuff lying around. Micron's level of success at putting this old stuff to work can be judged by looking at its image-sensor sales growth. Revenue reached $749 million last year, up from a paltry $99 million in 2004.

Unfortunately, the high growth rates seen in the CMOS image sensor market may be behind us. According to market-research firm iSuppli, cell phone handsets consumed a bit more than 600 million of these units in 2006, accounting for more than 85% of all sensors shipped last year. By 2010, iSuppli estimates that mobile phones will still consume 84% of all sensors, but because of growth in the number of handsets shipped, the total number of units should exceed 1 billion.

If you shake and bake these numbers, you find that iSuppli expects the overall CMOS image sensor market to grow by 14%-15% annually through 2010. This growth rate may not seem too bad, but this is growth in units, rather than revenues. Throw last year's 19% average selling price decline (for Micron's sensors) into the mix, and it is possible that revenues for the industry overall will grow in the low- to mid-single digits at best over the next few years.

A continuation of average selling price declines seems likely, given that some semiconductor giants are squaring up -- Micron's success hasn't escaped notice. Competitors include MagnaChip, Samsung, Omnivision (NASDAQ:OVTI), Sony (NYSE:SNE), STMicroelectronics (NYSE:STM), and Toshiba.

In order for any one of the players listed above to outgrow the market, it will likely have to steal market share. Hmm ... slowing growth and increasing competition -- sounds like an environment ripe for a price war. Investors beware.

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Fool contributor Dan Bloom has no financial interest in any company mentioned. If you have comments, you can contact him at The Fool has a disclosure policy.