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At least Nikon and Fujifilm camera have this limitation, which can only get passed using an external intervalometer. Could there be a legal reason for it?

Although the cameras' battery life when using zoom, autofocus, lcd etc. is often below 999 shots, their autonomy in manual mode or with external batteries can be much longer.

Related questions:

Is there any way past the 999 photo limit on the Nikon D700's intervalometer?

Is there a way to use the Nikon D300's timer for more than 999 exposures?

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Your assumption is incorrect. The Panasonic Lumix DMC-GX8 can shoot up to 9999 frames. It's 9999 instead of 999 simply because they chose to dedicate space for another digit. I doubt there is a apreciable difference in cost for doing so.

Similar question arise regarding Bracketing and Multiple Exposures. For each setting, the limit has to be chosen somewhere and manufacturers make a decision based on the target audience. That is why entry-level cameras often doe 3-frame AEB while upper ones allow up to 9. It is simply a reasonable limit - as defined by the manufacturer.

For anything that runs for so long, note that most people are unable to use even 999 frames because the battery will run out on most cameras long before that. Advanced users use a DC coupler to get beyond the limit of battery-life, so can also get a dedicated intervalometer to pass the interval timer limit. The impact of such limit is minimal because there is a workaround.

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It's most likely to do with the additional complexities required surrounding counting 4 digits, and displaying 4 digits on LCD screens. A chip that counts to 999 and stops before 1000 is probably much cheaper than a chip or IC (integrated Circuit) that counts to 9999 and stops before 10000.

Likewise, real estate on LCD screens is at a premium, so fitting in a 4th digit may be impractical without making the whole screen bigger. That and the component costs are likely to be higher, much like the chips.

I would hazard a guess that it's a decision taken by manufacturers on based on the cost/benefit comparison, following the principle that 999 should be plenty for most people, and that there wouldn't be enough additional customers to be able to recover the additional cost.

As an aside, but probably for much the same reason, you might see the available shots display on a digital camera only ever show up to 999. If you put a huge capacity card in that can fit 1000 or more photos, the shots remaining display on every camera that I've used will still only display 999. But it won't start going down until there are less than 999 shots left. It checks the free space, and estimates the number of shots, so 999 displayed essentially means 999 or more.

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    It takes the chip just as many bits to count to 1023 as it does 999. The first issue is a software/display limit not a hardware limit. – Matthew Whited Aug 5 '16 at 14:31
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    IC usually stands for integrated circuit, which is the same thing as a chip in common parlance. Integrated controller isn't very specific, but it typically refers to a more complex device, a board containing several IC's used to control some other device. The screen real estate aspect of your answer seems like the most likely explanation. – Caleb Aug 5 '16 at 14:41
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    @Caleb thanks, Integrated Circuit is probably what I meant. I'll update my answer. I was trying to refer to the little black chips with legs that I vaguely remember in electronics going way back to school and working on breadboards – laurencemadill Aug 5 '16 at 14:43

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