That leads us to the unavoidable conclusion that small sensors stand in the way of better P&S cameras. Small sensors are used since they are cheap and allow to make the optics smaller and lighter, in turn allowing for smaller and lighter cameras. People like their P&S small and light. Cheap too or at least cheaper than the Sigma DP-1.These two camera DO have sensors almost as good as one can expect
at their size. What many people fail to grip is that ALL
tiny-sensor cameras have TREMENDOUS amounts of shot noise. There
is no way around this at any given ISO, and there NEVER will be,
because you can not count photons that aren't there.
That said, I believe there would be room for P&S with somewhat larger sensors. Once upon a time 2/3" sensors were common, but today they are a rarity. There are no compact cameras with 1" or 4/3" (a.k.a. FourThirds) sensors. APS-C might be a bit too big for compacts to be practical, but currently there is a lot of room for growth while still keeping the sensors smaller than APS-C.
Unfortunately the men in the suits have counted with their spreadsheets that there is not too much money to be made in high quality large sensor compacts. It is quite understandable, since people even in this forum seem to want light P&S with long zooms (2-3x zooms are often called too short). And they are simply not possible with current sensor technology, if the sensors are to be significantly larger than they are today.