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Mar 5, 2002
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Digital Trend Challenging Camera Makers

Apr 9, 10:42 PM (ET)


TOKYO (AP) - They are some of the most legendary names in photography.

Minolta scored the world's first successful auto-focus, single-lens reflex camera. Fuji invented 1600-speed film, once the industry's fastest. Nikon's fabled F-series made the 35 mm camera the picture-taking workhorse for the last half-century.

Now the companies share a more dubious distinction: abandoning part of the business that made them famous.

Camera makers have battled to adapt to the digital revolution for the last 10 years, but recent retreats by leading brands underline how the industry has turned upside-down.

With interlopers like Sony, Panasonic and Samsung capitalizing on their high-tech know-how, traditional camera makers and their black scrolls of film may soon join 19th-century daguerreotypes as museum-shelf curios.

In just the past few years, digital cameras have catapulted from cutting-edge novelties to mainstream must-haves. But with the market poised to plateau, more players are chasing fewer opportunities and the old guard is losing out.

"It's inevitable that many of the camera manufacturers in the market today will be either bought up or go out of business," said Ed Lee, an analyst with InfoTrends Inc., a U.S.-based market research group.

More than three-quarters of all cameras sold today are digital, and digital images are expected to account for 90 percent of all professionally taken photos by 2010, compared with 70 percent now, according to InfoTrends.

Camera buffs were stunned in January when Konica Minolta Holdings Inc., which traces its roots to 1873, said it was quitting the camera business altogether - digital and film - and selling its digital assets to rival Sony Corp. (SNE)

Nikon Corp. said the same month it would stop making seven of its nine film cameras and concentrate on digital models.

Fuji Photo Film Co., which plans to cut 5,000 jobs, changed directions last month announcing it would spend nearly $8.5 million to diversify into pharmaceuticals.

Europe's biggest film maker, Germany's AgfaPhoto GmbH, couldn't adapt at all; it's now bankrupt and liquidated.

Meanwhile, Antonio Perez, who is leading Eastman Kodak Co. (EK) through a four-year digital remake, has warned that Kodak, the pioneer of point-and-shoot photography, is now "at the worst possible place" after a $1.03 billion third-quarter loss.

Kodak, which is cutting up to 25,000 jobs, is the third-biggest digital camera maker worldwide, behind Sony. But Kodak was slow to shift its focus to digital, quitting the black-and-white paper business only last year.

Die-hard film fans in groups like the Konica Minolta Photo Club mourn the passing of an era.

"Some members are very sad because they've been using Minolta for a long, long time," club liaison Tadashi Hasegawa said. Some club benefits are being phased out, including discounts on used camera gear.

Many of the big names in photography were once startups in their own right as they rushed to market in the 1950s with the advent of 35 mm cameras, undercutting and stealing market share from European makers.

Now they are the ones having difficulty adapting to the technology used in digital cameras: image processing chips and sensors called charge-coupled devices, or CCDs, which capture light and transform it into digital signals.

"In today's era of digital cameras, where image sensor technology such as CCD, which we don't have, is indispensable, it became difficult to timely provide competitive products," Konica Minolta spokesman Minoru Ikehara said.

Some names, such as Kodak, Nikon and Olympus, farm out manufacturing of digital cameras to high-tech firms with expertise. Sanyo Electric Co. (SANYY) and Taiwan's Premier Image Technology Corp. and Altek Corp. are among the ghost makers.

One key exception is Canon Inc. (CAJ), which successfully made the transition from film by investing heavily in digital technology.

Canon shipped about 12.6 million digital cameras in 2004 to lead the world with a 17 percent market share, according to U.S. market researching company IDC.

The company has leaned on marketing to make sure consumers don't forget its well-established brand name amid the onslaught of digital newcomers, IDC analyst Chris Chute said. Thus, Canon's camera division accounted for only 35 percent of the company's overall sales last year, but 42 percent of total operating profit.

That performance has helped Canon record six straight years of record earnings and boosted its president, Fujio Mitarai, to cultlike status in Japan, where he was recently tapped to lead Japan's most powerful business lobby.

Global shipments of digital cameras are expected to peak at 92.7 million units this year, then start declining due to market saturation, according to IDC. That means a smaller pie to divide among even more producers.

Traditional camera makers like Nikon are hoping to keep a toehold in high-end digital SLR, or single-lens reflex, cameras. They are favored by professionals, use interchangeable lenses and tend to have higher profit margins.

But newcomers like Matsu****a Electric Industrial Co., which makes Panasonic products, are already unveiling their own SLRs.

Meanwhile, camera-equipped mobile phones are crowding the low-end, point-and-shoot market.

And Hewlett-Packard Co. plans to further undercut Kodak and Fuji by supplying retailers with kiosks so customers can simply plug in their digital camera's memory chip and instantly print pictures. Kodak is currently the world leader in this field, with 75,000 kiosks, but HP says its system will be cheaper because it's based on inkjet technology instead of dye sublimation.

"What you're starting to see is a big shakeout in terms of the folks who have decided to invest in photography, and the folks who've decided to diversify and stay and the folks who have decided to leave," Chute said. "Now we're in kind of unknown territory."

Despite the digital push, amateurs and artists who have shot on film since they first picked up cameras may never completely turns their backs on it, insisting that film still has the edge in lifelike depth, better resolution and more natural contrast.

Even today, film is still favored in education, portraiture, fine art and even in fashion, where many photographers still shoot in film but scan the images into a computer to take advantage of digital manipulation.

"The fact is, people prefer film," said Steven Brierley, sales director at Ilford Photo of Britain. "The look and feel of it puts it on a different level to digital output."

Hideki Fujii, director of the Nippon Photography Institute, a Tokyo-based photo school, echos the sentiment, even though his school has spent nearly $700,000 in the past five years to upgrade to digital computer labs.

"I use both, but I can put my heart into film," Fujii said. "I don't think we'll ever see it totally disappear."


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