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That market — the one that would be happy with a mediocre lens and great image processing - likely overlaps with people using top tier mobile devices for their work. After all, acceptable lenses with amazing image processing is basically what the flagship iPhones and android devices bring to the table, and their use case tends to overlap with that of a 50mm prime.

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This strikes me as true.

I wouldnt say the camera companies did not see this coming. They did and chose to not do anything about it. I shoot videos with some pretty low end DSLR cameras and they are often lacking the feautures of any modern flagship phone. It's a joke. We once used a whole Iphone shooting at 120fps and made some plain scenes look amazing in post. A revelation since most pro videographers pooh pooh phone cameras without realizing that they are growing with alarming speed.

The pros are well aware of the gains made by phone cameras. Sensors and pixels aren't the primary factor for choosing say, a $10,000 camera, over an iPhone. Reliability, battery life, form factor, control ergonomics, lens compatibility, codecs, ease of integration with third-party equipment, standards compliance, and on it goes. I don't think the opinion is that an iPhone can't make a nice image, just that they are woefully insufficient for many needs for reasons other than the sensor and processing algorithms.

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