An Era of Mergers?

[scottburgess]

Thought it would be fun to start a thread about the possibility that we are entering an era of mergers and corporate closings in 35mm/compact photography companies. Business analysts frequently say there are too many players in these markets and a shakeout is inevitable, but it has not really happened yet.

Some general questions:

So are the analysts right? Who might buy whom, and for what reasons? Who will go down swinging because they have no technology or patents worth selling? What companies are best positioned to weather the tough times over the next several years? What data can help us forecast their futures?

Some more specific questions:

Are Canon, Nikon, and Sony swamping the market with too many SLR body choices, forcing competitors out? (Perhaps relevant here: "Too Many Choices," Consumer Reports, March 2014.)

Is there any photo company Canon should buy? If so, why?

What might become of offerings from Olympus, Pentax/Ricoh, Sigma, Panasonic, Leica, Zeiss, Samsung, etc...?

Please share data, analysis, and your reflections on this!

 

[jrista]

Thought it would be fun to start a thread about the possibility that we are entering an era of mergers and corporate closings in 35mm/compact photography companies. Business analysts frequently say there are too many players in these markets and a shakeout is inevitable, but it has not really happened yet.

Some general questions:

So are the analysts right? Who might buy whom, and for what reasons? Who will go down swinging because they have no technology or patents worth selling? What companies are best positioned to weather the tough times over the next several years? What data can help us forecast their futures?

Some more specific questions:

Are Canon, Nikon, and Sony swamping the market with too many SLR body choices, forcing competitors out? (Perhaps relevant here: "Too Many Choices," Consumer Reports, March 2014.)

Is there any photo company Canon should buy? If so, why?

What might become of offerings from Olympus, Pentax/Ricoh, Sigma, Panasonic, Leica, Zeiss, Samsung, etc...?

Please share data, analysis, and your reflections on this!

Hmm, interesting, if highly speculative and complex topic! I'd have to go digging for a while to solidify my own opinions before I offered any in depth opinions.

That said, regarding the question of who Canon should buy, and why.

I don't think Canon should buy any other "camera" companies. I don't think they will, either. Why? It doesn't fit Canon's MO. Canon built their name and reputation on the notion of completely controlling the process, top to bottom, end to end. Buying another brand and relabeling it as their own...that would kind of break the Canon guarantee of in-house design.

What I think would be most beneficial for Canon from a technological and market perspective would be for them to buy some existing sensor fabs. Ones that already do 300mm wafer fabrication and are already capable of manufacturing full frame sensors on those larger wafers. For as many players as there are in the camera market, there are even more players in the sensor market. Canon needs a leg up on the sensor technology front. They could probably eventually develop all the sensor technology on their own, hell they probably already have a lot of it...they just don't seem to have the current fab capacity to employ all their sensor tech on larger formats yet (at least, so we assume...still not sure how they made the 70D sensor wit hit's DPAF.)

Sony just bought a Renesas 300mm fab. When I read that news last month, I had wished Canon had purchased it. Renesas doesn't generally seem to manufacture image sensors, however they have had the fab capacity for it for some time. Canon could have greatly benefited from a ready-made fab capable of producing FF sensors on 300mm wafers.

I don't think that such a move would change the total number of players in the digital camera market much. To be honest, I'm not really sure there is much that will change the current state of the market. Some companies have had their struggles, but all of them have been very competitive. Especially in recent years, on the optical front, smaller companies like Sigma and Tamron have really started making a name for themselves. Their lenses have ticked up a notch on the quality and capability fronts, and are starting to become highly competitive with brand name lenses.

The diversity of competition is really actually quite healthy for the market, and ultimately only means better things for consumers. As a consumer myself, I would be honestly quite sad to see consolidation. Consolidation would mean a reduction in the competitive playing field, a disruption in the offerings and timetables of whoever merges, possibly a reduction in product diversity in the future, etc. I'm very much against such a move. At least, not amongst any of the brands you listed and a few others: Canon, Nikon, Sony, Olympus, Pentax/Richo, Panasonic, Samsung, Leica, Zeiss, Sigma, Tamron, Samyang/Rokinon/Bower. These companies all seem to be healthy or at least healthy enough, and the competition between them is economically very sound and healthy. If there are more niche or background brands that aren't as well known to the public at large in the world market, it would be those companies that could stand to be absorbed by one of the above.

 

[Don Haines]

Thought it would be fun to start a thread about the possibility that we are entering an era of mergers and corporate closings in 35mm/compact photography companies. Business analysts frequently say there are too many players in these markets and a shakeout is inevitable, but it has not really happened yet.

Some general questions:

So are the analysts right? Who might buy whom, and for what reasons? Who will go down swinging because they have no technology or patents worth selling? What companies are best positioned to weather the tough times over the next several years? What data can help us forecast their futures?

Some more specific questions:

Are Canon, Nikon, and Sony swamping the market with too many SLR body choices, forcing competitors out? (Perhaps relevant here: "Too Many Choices," Consumer Reports, March 2014.)

Is there any photo company Canon should buy? If so, why?

What might become of offerings from Olympus, Pentax/Ricoh, Sigma, Panasonic, Leica, Zeiss, Samsung, etc...?

Please share data, analysis, and your reflections on this!

Google buys everyone..... closes down all camera and lens producers, successfully sues cell phone manufacturers and gets them to stop putting cameras in phones, and still nobody buys google glasses

 

[scottburgess]

Hmm, interesting, if highly speculative and complex topic! I'd have to go digging for a while to solidify my own opinions before I offered any in depth opinions.

I look forward to anything you can offer. I was kind of hoping that someone like you might have ready access to enough corporate info on the companies to say what their fiscal health and profitability were looking like.

I don't think Canon should buy any other "camera" companies. I don't think they will, either. Why? It doesn't fit Canon's MO. Canon built their name and reputation on the notion of completely controlling the process, top to bottom, end to end. Buying another brand and relabeling it as their own...that would kind of break the Canon guarantee of in-house design.

I tend to agree with this, but I wasn't thinking of keeping the purchased company's product line--merely integrating their patents and star performers into Canon. In that sense, there may be reasons to buy an unhealthy company on the cheap, perhaps even then selling part of it away to someone else. The purchase of the Renesas fab is interesting. Here I am wondering if other critical technologies or manufacturing assets could be gleaned from competitors. Maybe one of them has a 300mm fab?

I agree that consolidation is probably not favorable to the consumer if it does happen. I am not knowledgeable about market forces which act against consolidative trends and again was hoping to learn a bit from others here.

 

[Don Haines]

I could see one of the big players trying to take over GoPro... GoPro seems to have a lock on the sport/adventurer camera and it seems like a profitable niche.....

 

[Mt Spokane Photography]

Analysts have been predicting mergers for several years. Some companies have merged, but nothing major or unexpected.

I don't think we will see a era of mergers, its been happening for a few years and will continue slowly as the smaller companies are unable to invest the big bucks it takes for updated technology.

 

[Hillsilly]

I'd say its unlikely we'll see any mergers. If anything, we'll get more smaller players (ala GoPro, BlackMagic and Samsung). You just have to look at the lens makers to see many people have an interest in doing camera equipment "better", with recent entrants like Samyang, Lomography and Noktor. Right now, I'd suggest that there must be a few Chinese companies looking closely at getting into the camera industry - not that they'd expect to make huge profits, but a quality camera division gives a company a lot of technical credibility. Provided they don't lose too much money, it can be a cheap way to raise brand awareness.

 

[Albi86]

I'm not sure we will see big mergers because photography brands carry a lot of weight.

However we might see more tight partnerships, such as Sony-Zeiss and Panasonic-Leica. There has been reports of a Sony-Olympus partnership, for example.

Canon and Nikon, as someone said above, would not really profit from it image-wise.

 

[Arctic Photo]

I'd say its unlikely we'll see any mergers. If anything, we'll get more smaller players (ala GoPro, BlackMagic and Samsung). You just have to look at the lens makers to see many people have an interest in doing camera equipment "better", with recent entrants like Samyang, Lomography and Noktor. Right now, I'd suggest that there must be a few Chinese companies looking closely at getting into the camera industry - not that they'd expect to make huge profits, but a quality camera division gives a company a lot of technical credibility. Provided they don't lose too much money, it can be a cheap way to raise brand awareness.

I have a hard time seeing Samsung as one of the smaller players. Maybe not so big in photography yet, but it'd be foolish to bet against them. They might not go after the pro market, but possibly pretty much everything else. Time will tell.

 

[scottburgess]

The latest CIPA data were posted, so I quickly collected the information for total camera shipments and ILC shipments in Excel, built graphs including 4-year moving averages, and exported them.

First, on the total shipment graph: this looks like a clear change in trend, since the 4-year moving average is collapsing.

Second, there may or may not be a change of trend in interchangeable lens cameras. The recent drop may just be a shakeout of the mirrorless segment and the trend is not clearly broken.

But both Nikon and Canon are forecasting lower sales in interchangeable lens cameras.

 

[scottburgess]

The link for the article about the cut in forecasts for high end camera shipments published in December. What is notable here to me is that the source of falling sales is described as originating from hobbyists. So, people, please buy more stuff!

Another article from the same source analyzes data through 2012, but doesn't draw any surprising conclusions. It does note that the Asian region is expected to generate the most sales growth.

 

[scottburgess]

Attached is the current CIPA data on interchangeable lens shipments, again including a four-year moving average. The graph shows the same downtick as ILC camera sales do for 2013, but I don't know that I would conclude much yet about that as one data point does not a trend make. The four-year moving average is still stable. For camera enthusiasts, this bears watching for the next few years.

I find this data sequence from CIPA a tad frustrating: it is broken out into "35mm Format Lenses" and "Smaller than 35mm Format Lenses" but the latter scrapes together APS-C lenses with those for mirrorless segment cameras. I would have appreciated a breakdown that separated the mirrorless segment out.

Shipments of smaller format lenses dominate in terms of total ILC lens shipments: 77% in 2013, 78% in 2012 and 2011, for example. It appears that such smaller format lenses are a relatively stable percentage of total lens sales, which is reasonable since they are aimed at the dominant lower end of the market.

 

[scottburgess]

Canon Lens Milestones as a graph, using March 1987 as zero, and the relative month of announcement of the milestone as the x-axis value. They are pushing out more than 10 million lenses per year lately, so you can run your own guesses about the lens market share based on the previous graph. Canon hit 50 million lenses in January, 2010. Canon should become the first manufacturer to surpass the 100 million lens milestone very soon as the 90 million milestone arrived last May.

For comparison, Nikon started production of F-mount lenses in 1959, hit 50 million produced in September 2009, and reached 85 million in January 2014. I don't see any word on lens unit milestones from other manufacturers, so if you know here's an opportunity to share.

My crude back-of-the-envelope estimate from this data is that about 105 million interchangeable lenses were made in the ~4.2 years between December 2009 and today, with Canon making about 47 million EOS SLR lenses and Nikon making about 33 million F-mount SLR lenses, with likely additional IL production from the pair. That is about 76% market share of interchangeable lenses accounted for (excluding their share from the mirrorless segment) from just two manufacturers. It is such a huge percentage that I have trouble believing the numbers are correct!

So it looks like hobbyists generally turn to those two brands. The as-yet-unexplained weakness in the hobbyist market and stiffer competition from Sigma should be pressuring both companies to implement new strategies.

Enjoy, folks!

 

[Woody]

Canon Lens Milestones as a graph, using March 1987 as zero

Cool. Will try to check for Nikon numbers and plot suitable graph from that!

 

[dgatwood]

I'd say its unlikely we'll see any mergers. If anything, we'll get more smaller players (ala GoPro, BlackMagic and Samsung). You just have to look at the lens makers to see many people have an interest in doing camera equipment "better", with recent entrants like Samyang, Lomography and Noktor. Right now, I'd suggest that there must be a few Chinese companies looking closely at getting into the camera industry - not that they'd expect to make huge profits, but a quality camera division gives a company a lot of technical credibility. Provided they don't lose too much money, it can be a cheap way to raise brand awareness.

I have a hard time seeing Samsung as one of the smaller players. Maybe not so big in photography yet, but it'd be foolish to bet against them. They might not go after the pro market, but possibly pretty much everything else. Time will tell.

I was going to say the same. By market cap, they're the 37th largest company in the world, only slightly behind Amazon and Anheuser-Busch....

 

[scottburgess]

I have a hard time seeing Samsung as one of the smaller players. Maybe not so big in photography yet, but it'd be foolish to bet against them. They might not go after the pro market, but possibly pretty much everything else. Time will tell.

I think I would generally agree with this. Right now they're a smaller fish. But Samsung is willing to manufacture in numerous mature markets. I would expect their camera market share to gradually grow over time, especially at the entry level in the nearer future. The recent Canon announcement to exit low end cameras should benefit them.

 

[scottburgess]

Finally read about the Olympus corporate scandal from 2011-12 and looked at their stock trend. Longer term trend from 2007 looks noticeably downward, but the stock did bottom in early 2012 and has been doing well the last couple years, with the 25-month average turning slightly upward in 2013. The company had announced the closing of 40% of its manufacturing plants and the layoff of 7% of its workforce by 2015. I currently presume that the photography and endoscope lines were not targeted for cuts, but this does make me wonder if they are too cash-poor at this juncture to invest sufficiently in R&D that would keep them competitive in camera markets.

Hmm...

 

[Hillsilly]

I have a hard time seeing Samsung as one of the smaller players. Maybe not so big in photography yet, but it'd be foolish to bet against them. They might not go after the pro market, but possibly pretty much everything else. Time will tell.

I think I would generally agree with this. Right now they're a smaller fish. But Samsung is willing to manufacture in numerous mature markets. I would expect their camera market share to gradually grow over time, especially at the entry level in the nearer future. The recent Canon announcement to exit low end cameras should benefit them.

Yes - I meant that Samsung were currently a smaller player in the camera industry. Overall, they have a stated goal of becoming the largest manufacturer of retail goods in the world.