Any Hope for Canon?

[Fred Ragland]

Michael, thank you for sharing Friday's "International Herald Tribune" article which comments on changing trends in Japan's digital camera business.  The commentators note the decline of Pentax and why the short-product-cycle digital camera industry is not a good environment for optical-technology lense-making companies.

Where, for example, does that leave Canon?  Not long ago it's fortune was based on lenses and 35mm camera boxes.  Now it must compete in digital cameras "which as a business are not like cameras but more like home electronics with short product cycles.  It is not an efficient business for camera manufacturers to be in".

The article indicates "Its a winner-take-all game where unless you become the winner, you lose all your profits."  Winning requires developing chip-technology and building scale faster than competitors which are trying to catch up.

Canon develops its own chips.  It has to rapidly advance its camera and chip software, create efficient fabs requiring large commitments of capital, and have it all online in a timeframe that bests the competition.    

Any hope for Canon?

[Graeme Nattress]

The local camera store used to sell a couple of SLRs a month a few years back, now it's a D-SLR a day. I'd guess >50% of those DSLR sales are Canon, most of the rest being Nikon. They're selling more lenses and more high quality lenses than ever.

Graeme

[michael]

If there's no hope for Canon, then there's no hope for anyone else!

Canon is the big dog of the digital camera market, with something like 50% market share. Nikon has another 30%, and everyone else shares the remainder.

The question is not what happens to Canon. The question is, can any other company stick with them on the fast track?

Michael

[Graeme Nattress]

And can any company supply Canon with the quality competition they need to make sure they don't rest on their laurels?

Graeme

[HiltonP]

This extract from an online discussion with our local CANON representative might explain why they might not feel under threat :

"Our head office did not expect the massive boom in lens sales that has happened in the last 12 months. We've been selling DSLR's hand over fist now for 5 years and the demand for lenses reached critical level early last year. Canon opened a new lens production facility in November 2005 with a huge factory currently running at 175% of production expectation, but with a back order situation right now of over 200 000 lenses!  . . . Once again it's a wonderful situation for us to be in (demand exceeding supply) . . . We do beg your patience while we catch up with the insane demand . . . Just so you know, in January 2006 we produced our 30 millionth EF lens. This is since we started with EF lens production in 1987 . . . "

[dmcginlay]

I believe that the PC industry is a good analogy for the digital camera industry.

“Faster, better and cheaper,” is the mantra used in this industry because there is no allegiance to brand anymore.

I have had 5 different brands of laptops and desktop PC’s in the last 10 years always picking the cheapest brand that met my needs. Most of the motherboards are made by the Taiwanese and the monitor I used is made by the Koreans. Even the main processor unit is not made by Intel anymore but by a competitor (AMD) because this CPU is faster, better and cheaper. Why did Apple go to Intel for the CPU? Price/Performance!

Look at the “point and shoot” market. Your next “point and shoot” camera is also your cell phone with a 10 Mega pixel CCD. Granted the lenses are not up to the quality standards of professional photographers – yet!

When will the Taiwanese or the Koreans come to market with a DSLR body with either a Canon or Nikon lens mount? One year, two years – what’s your guess?

Then will their next focus be the Leaf and Phase companies? Maybe the medium format will be their first focus since making digital camera backs are mostly electronic, something that the Taiwanese and Koreans are already really good at. They certainly have driven the cost of memory done over the years maybe they can do the same for the CCD? I bet on it!

[dlashier]

When will the Taiwanese or the Koreans come to market with a DSLR body with either a Canon or Nikon lens mount? One year, two years – what’s your guess?

Remember, thats how Canon and Nikon got started, by copying the German cameras Contax (Nikon) and Leica (Canon).

- DL

[BJL]

The article indicates "Its a winner-take-all game where unless you become the winner, you lose all your profits."  Winning requires developing chip-technology and building scale faster than competitors which are trying to catch up.

Canon develops its own chips.
[a href=\"index.php?act=findpost&pid=66801\"][{POST_SNAPBACK}][/a]

One problem with this argument:
- The comments in the article are partly or entirely aimed at the fixed lens "digicam" market, which truly has become a fast moving, low margin part of the consumer electronics market.
- Canon outsources all its digicam sensors from Sony etc., while competitors Sony, Kodak, Fuji and Panasonic make some or all of their own digicam sensors
- Despite this "disadvantage", Canon is consistently one of the top two in digicam sales and profits.

So the frequent claim that making your own sensors is important or even essential to success seems to fail badly on the example of Canon and fixed lens digicams.

[Ben Rubinstein]

It could be that the 'in your face' canon is due to their prominence in the DSLR market and might be the reason behind their P&S sales, Since canons dominance in the DSLR/Pro world is due to the fact they do indeed make their own DSLR chips, that it has an indirect connection.

[BernardLanguillier]

When will the Taiwanese or the Koreans come to market with a DSLR body with either a Canon or Nikon lens mount? One year, two years – what’s your guess?
[a href=\"index.php?act=findpost&pid=66856\"][{POST_SNAPBACK}][/a]

Although the physical mount would probably be doable (at least for Nikon), I believe that would have to licence to Canon/Nikon the value added electronical part.

Until now both Canon and Nikon have firmly resisted any temptation to open up their system, I don't think that they would do it in the future either.

Would it be legal for a company to reverse engineer the EOS/Nikon body side mount? I am not sure, but I don't think so.

Cheers,
Bernard

[BernardLanguillier]

Since canons dominance in the DSLR/Pro world is due to the fact they do indeed make their own DSLR chips
[a href=\"index.php?act=findpost&pid=66934\"][{POST_SNAPBACK}][/a]

Do we know this for sure?

I agree that Canon's dominance has to do with the quality of the sensors they use, but my guess is that they would be just as dominent if these sensors were made by another company - providing they deliver the same quality of course.

Nikon is a good example that a company buying chips from another provider can be highly profitable as well.

My guess is that Canon could jump ship to another chip provider if a sufficient technological gap showed up. IMHO, Canon is in the business of selling cameras, not of making sensors.

Regards,
Bernard

[dlashier]

Would it be legal for a company to reverse engineer the EOS/Nikon body side mount? I am not sure, but I don't think so.

Why would this be any different than the lens side, which many companies (eg Sigma) have reverse engineered? Of course it could be that Nikon/Canon just benignly overlook this but I can't imagine that someone would invest millions on thin legal grounds.

- DL

[bruce fraser]

Do we know this for sure?

I agree that Canon's dominance has to do with the quality of the sensors they use, but my guess is that they would be just as dominent if these sensors were made by another company - providing they deliver the same quality of course.

Nikon is a good example that a company buying chips from another provider can be highly profitable as well.

My guess is that Canon could jump ship to another chip provider if a sufficient technological gap showed up. IMHO, Canon is in the business of selling cameras, not of making sensors.

Regards,
Bernard
[a href=\"index.php?act=findpost&pid=66943\"][{POST_SNAPBACK}][/a]

Canon's chip-fabrication business is much bigger than its camera business, just as Nikon's stepper-motor business is much bigger than Nikon's camera business.

[BernardLanguillier]

Canon's chip-fabrication business is much bigger than its camera business, just as Nikon's stepper-motor business is much bigger than Nikon's camera business.
[a href=\"index.php?act=findpost&pid=66947\"][{POST_SNAPBACK}][/a]

Bruce,

Sure, but as far as I understand, they are basically different units with different business goals.

I don't believe that the camera divsion would accept to see its competitiveness theatened significantly by having to stick to inferior in-house sensors. Large Japanese industrial groups have suffered enough in the past because of such practises for Canon to fall into that trap.

But I would be wrong of course.

Regards,
Bernard

[bruce fraser]

Bruce,

Sure, but as far as I understand, they are basically different units with different business goals.

I don't believe that the camera divsion would accept to see its competitiveness theatened significantly by having to stick to inferior in-house sensors. Large Japanese industrial groups have suffered enough in the past because of such practises for Canon to fall into that trap.

But I would be wrong of course.

Regards,
Bernard
[a href=\"index.php?act=findpost&pid=66948\"][{POST_SNAPBACK}][/a]

I don't believe for an instant that the Camera division would accept having to stick to inferior in-house sensors if that were the situation, I was simply speaking to the narrow point that Canon is very much in the business of making sensors.

But a camera is much more than the sensor, and I do believe that one of Canon's significant advantages in the pro DSLR market is that they have total in-house control over all components. (Then again, their fab lines use Nikon stepper motors....)

[BernardLanguillier]

I don't believe for an instant that the Camera division would accept having to stick to inferior in-house sensors if that were the situation, I was simply speaking to the narrow point that Canon is very much in the business of making sensors.

But a camera is much more than the sensor, and I do believe that one of Canon's significant advantages in the pro DSLR market is that they have total in-house control over all components. (Then again, their fab lines use Nikon stepper motors....)
[a href=\"index.php?act=findpost&pid=66954\"][{POST_SNAPBACK}][/a]

Bruce,

OK, I should have written "the camera business unit of Canon is not in the busines of making sensors". That would have avoided some confusion.

Having a total control over the components used is indeed definitely a huge plus.

Having to use standard parts, like the 6MP Sony sensor, must be a drawback, but working in close cooperation with a supplier to develop a sensor for a specific application (like the D2x for instance) is IMHO not a problem.

Companies like Canon are used to working in very close cooperation with Tier one suppliers. Out-sourcing key components of a complex product is a common practise in many industries that does typically not impact negatively the specs of the end product.

This is especially true in Japan where the engineers of the supplier are often located on site at the OEM for the duration of a project. I speak based on first hand experience. I have played such a role in the past, even if the field was not consumer electronics.

Cheers,
Bernard

[BJL]

It could be that the 'in your face' canon is due to their prominence in the DSLR market and might be the reason behind their P&S sales, Since canons dominance in the DSLR/Pro world is due to the fact they do indeed make their own DSLR chips, that it has an indirect connection.
[a href=\"index.php?act=findpost&pid=66934\"][{POST_SNAPBACK}][/a]

This is a huge stretch of the facts!

Firstly, Canon's digicam stength preceeded its move into DLSRs, and surely stands on its own merits.

Secondly, Canon's SLR dominance also preceeded their digital SLR's. The SLR market pattern of Canon #1, Nikon not far back at #2 and other brands way back was well established in the era of films SLR's, and is probably explained mostly by the factors that already applied in the fim era.

For example, Nikon, Pentax and Konica-Minolta use the same 6MP Sony sensor in many of their DSLRs but Nikon's models sell far, far better: over a million last year of the D70s and D50, only about 120,000 for all the Pentax models using the same sensor.

The significant shifts in the SLR market caused by the digital transition are the rise of Olympus and of the new smaller formats like EF-S, DX and 4/3, the decline in market share for Pentax and Konica-Minolta, and the huge decline in market share for medium format and 35mm format.


I suggest that we try to move past the digital-inspired obsession with sensors as the only important aspect of a DSLR or of an SLR system, ignoring othe important features of bodies and the importance of lenses and accessories. This is the obsession that made so many people criticise the 30D (and D70s) as adding nothing much new, despite clear improvents over the 20D (and D70). If the 20D and 30D had been film cameras, no-one would have doubted the value of the 30D improvements, and the D70s sold very well.

[Ben Rubinstein]

I agree that Canon's dominance has to do with the quality of the sensors they use, but my guess is that they would be just as dominent if these sensors were made by another company - providing they deliver the same quality of course.

I was implying that the economic aspect of making their own chips is the factor behind their pricing structure. Quality is an argument that I have no right to enter in on.

BJL TBH it isn't me or you who is pushing the sensor, it is the consumers who are only just stopping the 'megabyte' mindset. That aside I would say that the actual camera body is no longer as important as the sensor inside it. What do I mean? People happily put up with the compromises of medium format cameras and lenses compared to 35mm because they were getting that bigger peice of film. To the same extent I would happily trade the ergonomics, build and weather proofing of the D200 or D2X for the FF chip of the 5D with its incredible resolution, DR, noise and tonality (for a 35mm sized chip!   ). Infact I did just that when I sold my 1Ds and almost went over to the dark side of the force in the shape of a D2X rather than the 5D.

I'm looking to buy a Pentax DSLR to hang off those 3 pancake primes as a great street shooting setup. I want a camera that can be on me at all times and all places. Yes the new K100D would be good enough, but to be frank the chip isn't. I want to be able to use the camera to build up a big collection for stock and I want the bigger chip. Nothing wrong with the camera per se but the chip lets it down for me and for my requirements. The chip is still an important element.

[Scott_H]

I was implying that the economic aspect of making their own chips is the factor behind their pricing structure. [a href=\"index.php?act=findpost&pid=67306\"][{POST_SNAPBACK}][/a]

I think the market is going to drive the price.  

I'm not sure that a camera company making their own chips is neccesarily an economic advantage.  Maybe Canon sells enough volume to justify the capital and other resources associated with manufacturing their chips.  Nikon may be able to support the expense.  Maybe the break even point lies somewhere in between the two and maybe they didn't think the capital expense was worthwhile.  The sheer number of cameras that Canon sells is why they can make their own sensors.

For a company like Pentax or Olympus making their own chip is probably prohibitively expensive.  They just aren't going to sell enouugh cameras to pay for the cost.  Few companies are vertically integrated these days; it generally makes more economic sense to purchase hardware from speialists and assemble them.

Maybe Canon has the economies of scale that making their own chips is more profitable.  Personally, I doubt it Canon is more pforfitable becasue they are making their own chips.  Maybe they keep it in house to protect their intellectual property.  Maybe the chip makers didnt' feel the market place supported full frame, so they went their own way.

[alainbriot]

"I agree that Canon's dominance has to do with the quality of the sensors they use, but my guess is that they would be just as dominent if these sensors were made by another company - providing they deliver the same quality of course."

But would they deliver the same quality?  That's the crux of the problem isn't it?  This would also give the competition access to the same chips, reducing Canon's advantage which right now is purely and simply being the only DSLR manufacturer to use a full-frame CMOS chip...

If Canon wasn't profitable making and selling their own chips, the opportunity to sell chips to other camera manufacturers is there.  Why don't they do that?  Maybe because they are doing just fine as it is, getting a significant advantage using a chip nobody else has access to?  In other words they are developing cutting edge chips and making then unavailable to anyone else... Add their volume of sales and you have the recipe for a solid success.

ALain