Canon, Nikon realign businesses to compete with Samsung
By Choi Kyong-ae
Korea's higher mobile-phone penetration rate is forcing Japanese camera manufacturers to rearrange their business portfolio in Korea where seven out of 10 mobile consumers carry smartphones.
Japanese camera makers such as Canon and Nikon are scrambling to reorganize their portfolios after they found that consumers prefer smartphones, the most convenient picture-taking device to quickly share photos on social networks such as Kakaotalk and Facebook, to the "point-and-shoot" cameras.
As was the case with other consumer products, the entry-level digital cameras became the latest victim taking the brunt of a rapidly-changing appetite among tech-savvy Koreans. In the past, mobile phones and flat-panel screen televisions replaced pagers and cathode-ray-tube TVs, respectively.
For camera companies, "the biggest challenges have to do with the fact that consumers value sharing images immediately from a device, and it is a required feature not found on many cameras," Christopher Chute, research director at International Data Corporation (IDC), told The Korea Times in an email interview.
The digital imaging analyst expected "the camera market to go into a long-term decline, with the result being that cameras will become specialized devices that cater to specific types of users, such as professionals and advanced amateurs."
IDC forecast that the global digital camera market will shrink 29 percent to 102 million units next year compared to 144 million in 2010. Worse still, the classic compact camera segment is expected to fall further to 80 million units this year, versus 132 million three years ago, according to the U.S. market research firm.
Hit by slumping demand for low-end digital cameras, Japanese camera brands have performed poorly in Korea where they have a lion's share and Samsung Electronics is chasing Japanese rivals.
Last December, Canon Korea Consumer Imaging posted a 15 percent decline in net profit at 9.55 billion won ($8.6 million) compared to 10.93 billion won a year earlier. Nikon Imaging Korea saw its net losses widen to 4.23 billion won in the year to March from 2.58 billion won a year earlier. They separately reported the figures to the Financial Supervisory Service.
In late July, Canon, the world's largest maker of digital cameras by sales, cut its full-year net profit outlook by 10 percent to $2.6 billion for this year, citing declining digital camera sales amid an extended economic slump.
"It is a world where smartphones have emerged as the archrival of cameras," Shin Sang-heon, a manager at Canon Korea, said by telephone.
Canon, which claims 60 percent of the high-end digital single-lens reflex (DSLR) camera market in Korea, will target high-end consumers with its premium lineup including DSLR and "mirrorless" cameras, said Shin. "We will stick to premium, specialized point-and-shoot models" with features such as water-proofing and enabling nighttime photography.
Korea's one trillion camera market consists of three segments ― DSLR, mirrorless and point-and-shoot. As they don't carry a mirror-based viewfinder system, mirrorless cameras are thinner than point-and-shoot models but generate high-quality images. DSLR cameras cost up to 7.8 million won per model, followed by mirrorless cameras available at 600,000 won-1.3 million won and point-and-shoot models at 200,000 won-300,000 won.
Sony Korea and Samsung Electronics account for a combined 80 percent of the domestic mirrorless camera market, with Sony taking the lead with a 51 percent share.
"In the first half (of this year), DSLR and mirrorless cameras both with interchangeable lenses formed a market of 274,400 units (in Korea)," Sony spokeswoman Jang Ji-na said. "Mirrorless cameras are in high demand."
The Korean mirrorless camera market is estimated to exceed 200,000 units this year, jumping from 8,537 in 2010, Sony said citing IDC data. Globally, IDC expects the mirrorless market to grow ten times to 13.11 million units in 2014 from 1.3 million in 2010.
Regarding mirrorless cameras, the IDC analyst said "the market data indicates that this type of camera is being viewed as more of an advanced camera than a point and shoot replacement, although this varies by country."
Camera brands such as Panasonic and Fujifilm said they won't ignore the booming mirrorless camera segment but they will also expand their non-camera business in Korea with a diversification strategy.
The two companies are importing medical-care equipment such as a massage chair and a horse-riding machine, beauty products and pharmaceuticals from Japan to sell them to Korean consumers.
"In Japan, Fujifilm earns 90 percent of its total sales of $31 billion from non-camera operations and the remaining 10 percent comes from the imaging division including cameras," Fujifilm spokesman Lee Jeong-ui said. "Fujifilm Korea currently earns about 90 percent of its sales from the imaging part but it will strengthen the businesses covering medical equipment, cosmetics and pharmaceuticals."
Samsung is a latecomer to the camera market dominated by Japanese brands. But analysts say the electronic giant stands to gain from the convergence of smartphones and cameras despite economic uncertainty.
"With its biggest strength of connectivity on its lineup, Samsung is in a better position to woo customers from its bigger rivals," said Kevin Lee, a technology analyst at Korea Investment & Securities.
Samsung entered the market in 2000 by launching a 300,000 megapixel camera and its mainstay products are mirrorless cameras and Wi-Fi connected digital compact cameras.
"Sales of those products are on the rise this year," a Samsung spokesman said without elaborating. In the January-June period, sales in Samsung's IT & Mobile Communications division, including digital imaging, soared 48 percent to 68 trillion won from a year earlier, said the spokesman.
The market for high-end cameras designed for "sharing, posting and tossing" will be the mainstream, with higher-end DSLRs remaining the "it" item for professionals and camera enthusiasts, said the analyst.