# Canon to Haul Capacity Back Home as Yen Continues Slide



## Canon Rumors Guy (Jan 10, 2014)

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(Reuters) – Canon Inc is shifting capacity back to <a title="Full coverage of Japan" href="http://www.reuters.com/places/japan" data-ls-seen="1">Japan</a> in an apparent vindication of Prime Minister Shinzo Abe’s yen-weakening policies, which have made it more profitable for some Japanese manufacturers to produce and export from home.</p>
<p>In the wake of the 2008 financial crisis, the world’s largest camera maker was caught out by its reliance on domestic production by a soaring yen – which devalued its overseas <a title="Full coverage of Earnings" href="http://www.reuters.com/finance/earnings" data-ls-seen="1">earnings</a>and increased labor costs – forcing the company to produce more overseas.</p>
<p>It is now set to reverse that shift, boosting jobs and factory operations in <a href="http://www.reuters.com/places/japan?lc=int_mb_1001" data-ls-seen="1">Japan</a> in a move that will delight proponents of Abe’s economic policies and erode the competitive advantage enjoyed by rivals such as Nikon Corp, which has long made the majority of its cameras overseas.</p>
<p><!--more--></p>
<p>Canon will raise the proportion of products made in Japan to 50 percent within the next three years from 42 percent now, Chief Executive Fujio Mitarai told Reuters in an interview on Thursday, after saying he was “looking forward” to a further slide in the yen.</p>
<p>“Right now we have spare capacity at home because we gradually moved production overseas,” said Mitarai, referring primarily to cameras and photocopiers. Canon cut back production at home from over 60 percent before the 2008 crisis to 40 percent in 2009.</p>
<p>The move is designed to make manufacturing more flexible and Canon will leave the option open to push production back overseas should the yen strengthen again, Mitarai said, adding that the company has no plans to build new factories in Japan.</p>
<p>The impact of Canon’s strategy will be reflected in the company’s balance sheet in the months ahead. For the financial year ended December 31, Mitarai sees operating profit as likely flat against a forecast of 11.2 percent growth, and sales up around 7 percent versus guidance of 7.8 percent. The company reports its results for fiscal 2013 on January 29.</p>
<p>Last year, the yen fell 21.4 percent against the dollar and 26.4 percent against the euro as the Bank of Japan launched an aggressive monetary easing program.</p>
<p><strong>AUTOMATION

</strong>Canon is also continuing its push to automate much of its production and replace humans with robots. Mitarai said he hoped to hike the proportion of automation at Canon’s lens factory in Utsunomiya, a city near Tokyo, to 50 percent at the end of 2014 from 10 percent to 20 percent now.</p>
<p>The company expects gradual progress in partial automation at its other factories, including Japan’s Oita, Nagasaki and Toride, to boost its gross profit margin by almost 1 percent to 48.3 percent in 2013.</p>
<p>Innovation in robotic production also means Canon can have factories in developed markets and remain immune to the high wages while keeping distribution costs low. But its plans for an automated printer cartridge factory in the Netherlands have been stalled by the prolonged chill in the European economy, with construction yet to start.</p>
<p>“We’ve bought the land but demand in Europe isn’t strong enough yet,” Mitarai said, adding that Canon had been too optimistic about a recovery in its biggest market, where it gets around a third of its revenue.</p>
<p>“Our forecasts for Europe at the beginning of last year were way off.”</p>
<p>Initially buoyed by a weakening yen, the company hiked its operating profit forecast in the first quarter of 2013 by almost 10 percent, saying that each yen that the Japanese currency slid against the dollar would boost revenue by 19.7 billion yen ($187.91 million) and operating profit by 7.7 billion yen.</p>
<p>However, the dramatic shrinkage of the compact camera market last year – estimated at 40.2 percent by researcher IDC – and an unforeseen weakening in high-end camera sales forced Canon to cut its profit forecast at the following two earnings announcements.</p>
<p>The CEO said he was optimistic that Canon can increase both revenue and profit by more than 5 percent in 2014, and could far surpass that level if the yen weakened beyond the company’s “conservative” estimates of 100 yen to the dollar and 135 against the euro.</p>
<p>On Thursday, the Japanese currency was 105 against its U.S. counterpart and 142.89 against the single currency. A weaker yen means it is cheaper to make goods in Japan, and boosts the value of overseas revenue once repatriated.</p>
<p><strong>SLR SALES

</strong>Mitarai said sales of digital single-lens reflex cameras likely came in under 8 million units in 2013 to mark the first annual decline since Canon introduced its first model in 2004.</p>
<p>Some analysts say that consumers are increasingly prioritizing connectivity and mobility over picture quality, finding themselves slipping their smartphones out of their pocket instead of hauling out their SLRs. Mitarai disagrees.</p>
<p>“There isn’t any impact from smartphones on SLRs. They’re a different genre. You can send your (SLR) pictures out to the world now with WiFi, to the cloud. The only difference is that you can’t make calls with your camera,” he said.</p>
<p>“We don’t have any plans to make a camera that you can phone someone with… But we will continue to put in more connectivity features into SLRs.”</p>
<p>Canon says that digital SLR sales softened this year due to the prolonged chill in the European economy and slowing growth in <a title="Full coverage of China" href="http://www.reuters.com/places/china" data-ls-seen="1">China</a>.</p>
<p>Canon’s global shipments of interchangeable lens cameras accounted for 45.1 percent of global shipments in July-September, according to IDC, a 5 percent drop in share from the year prior and a 25.7 percent drop in unit sales.</p>
<p>However, Mitarai said Canon had increased its share of the SLR market by a few percent over the whole year and would aim to increase unit sales in 2014, hoping to reach 9 million units in the short-term thereafter.</p>
<p>Source: [<a href="http://www.reuters.com/article/2014/01/09/us-canon-interview-idUSBREA0808I20140109" target="_blank">Reuters</a>]</p>
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## sanj (Jan 10, 2014)

Honest question: Is this good or bad? Is it not good for Japanese people?


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## Click (Jan 10, 2014)

It's not good for Japanese workers if they replace humans with robots


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## DJL329 (Jan 10, 2014)

Good ol' Abe.


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## ishdakuteb (Jan 10, 2014)

sanj said:


> Honest question: Is this good or bad? Is it not good for Japanese people?



if you are asking about quality control, i would say it is good, imo... much much better than any other countries in asia.


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## sanj (Jan 10, 2014)

ishdakuteb said:


> sanj said:
> 
> 
> > Honest question: Is this good or bad? Is it not good for Japanese people?
> ...



Then it is good for all!


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## weixing (Jan 10, 2014)

Hi,
Good for all as long as the Japanese government don't do anything stupid again to provoke one of the world largest market...

Have a nice day.


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## 9VIII (Jan 10, 2014)

But they have no right to sell that many cameras until they increase DR. This is just madness, did no-one tell the rest of the world that Canon is using horrible old tech?

Ahem.

It's cool to see mass automation actually being implemented, hopefully more industries move in this direction.


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## weixing (Jan 10, 2014)

9VIII said:


> But they have no right to sell that many cameras until they increase DR. This is just madness, did no-one tell the rest of the world that Canon is using horrible old tech?
> 
> Ahem.
> 
> It's cool to see mass automation actually being implemented, hopefully more industries move in this direction.


Hi,
May be the rest of the world don't actually see the different?? May be the improvement is not as big as we thought?? May be there are other features in Canon camera that are more important and better than other brand?? May be they just don't believe those who doing the testing... just like NASA said that they send human to Moon with pictures and videos, but there are still a lot of people don't think so...

Have a nice day.


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## ewg963 (Jan 10, 2014)

weixing said:


> Hi,
> Good for all as long as the Japanese government don't do anything stupid again to provoke one of the world largest market...
> 
> Have a nice day.


+1000000


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## Quasimodo (Jan 10, 2014)

While such a move might be good for the overall income of Canon, through tax breaks and the like, I assume that the labor cost of workers in Japan is quite higher than in the countries where they have had outsoured production. Hence, it might be a negative shift in prices from a consumer point of view. 

Also, it still does not alter the fact that the chains selling the Canon products, buy in Yen, while they have to sell to the consumers in those countries in their own currency. Large retail chains in Europe are bleeding on Canon products because of the yen, which they again have to push on their consumers. In Norway the 135L could be bought for about 1000USD, while now it has jumped to approx 1300USD after the negative shift in the Yen.


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## JohnnyWashngo (Jan 10, 2014)

Click said:


> It's not good for Japanese workers if they replace humans with robots



I fully agree with this and it saddens me to hear that Canon are seeking to increase the automation in their production process. The line about automation meaning they are more resistant to changes in the cost of wages makes me feel particularly sad. People's livelihoods depend on those wages. Replacing costly people with robots leaves a bad taste in my mouth.

To be honest, I have been considering buying more 3rd party lenses for my Canon bodies recently as Sigma seem to be knocking out some quality glass and their 35mm makes me very happy every time I use it. Looks like Canon are making that decision much easier for me with this news.


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## Grummbeerbauer (Jan 10, 2014)

JohnnyWashngo said:


> To be honest, I have been considering buying more 3rd party lenses for my Canon bodies recently as Sigma seem to be knocking out some quality glass and their 35mm makes me very happy every time I use it. Looks like Canon are making that decision much easier for me with this news.



According to Wikipedia (read it elsewhere, too, just don't remember where), Sigma's entire production is still happening in Japan in their Aizu plant.
It is good to see that there are still companies that do not put maximizing profit over everything else and therefore do NOT shift production to those places on this planet with the lowest wages, the lowest standards of environmental protection, and/or a questionable human rights situation.


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## captainkanji (Jan 10, 2014)

Not so good for the workers. The higher wages incentivizes Canon to automate processes to maintain profit margins. The same thing happened in the auto industry in the 70s&80s. You will start seeing more robots at fast food joints if minimum wage rises above companies bottom lines. It is good for QC as long as the machines are adjusted properly.


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## unfocused (Jan 10, 2014)

Modern economies are what they are.

Consumers demand the highest quality at the lowest prices. Notice on this forum how much whining and gnashing of teeth occurs whenever someone feels that Canon isn't giving them the latest and greatest innovation every two to three months. 

Similarly, investors today insist on continuous and high returns on their investments. Companies that can't keep their stock prices high and their dividends generous lose investors, which means they lose the money they need to innovate so they can develop and sell those new things to consumers, show a profit and maintain their stock prices and dividends. It's all a never-ending circle. 

Controlling the cost of production, including labor costs, is just one piece of the equation that has to be met.

So, yes, unfortunately, that means that in order to maintain their competitive position, Canon, or any other company, needs to have the flexibility to replace workers with machines when it makes financial sense and relocate facilities when that makes financial sense.

We can be nostalgic for a time (probably imaginary though) when workers, customers and companies felt more loyalty to one another. But companies have to live in the present, not an imagined past.


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## lilmsmaggie (Jan 10, 2014)

facedodge said:


> Wealth, buying power, production is what lifts all boats in a rising tide of industrial progress. Don't fall for the class warfare BS. We don't live in feudal times where the rich and powerful pillage the poor.



No. They just under-pay them or outsource to a country with a cheaper labor pool. 

I see this as a mixed blessing. It (increase use of robotics) will help Canon's bottomline and therefore its profits but may have an adverse affect on its population most likely in the short term. Yokohama, Nagoya and Tokyo rank in the top 20 for the most expensive cities in the world. 

Long term outlook, we'll just have to wait and see.

Japan's society is aging which means its labor pool is shrinking. Add to that, its cost of living, steep land and housing costs, company restructures and forced retirements, many of Japan's engineers, etc. are leaving for China and Korea. Affordability will be a challenge to live in Japan.


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## Mt Spokane Photography (Jan 11, 2014)

It was only a couple of years ago after the earthquake hurt Canon so badly, that they committed to the stockholders that they would spread out production more to reduce the chance of another earthquake shutting them down.

Apparently, their memory is not a very good one.


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## IMG_0001 (Jan 11, 2014)

Am I the only one to think that removing posts on a thread about industrialists choices and their impacts on worker because they include the terms 'class warfare' is excessive. I don't see these words as disrepectful or dangerous.


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## brad-man (Jan 11, 2014)

IMG_0001 said:


> Am I the only one to think that removing posts on a thread about industrialists choices and their impacts on worker because they include the terms 'class warfare' is excessive. I don't see these words as disrepectful or dangerous.



They're quite sensitive about anything political around here. Anyone got any pictures of the George Washington Bridge? Although Canon is sitting pretty in the camera end of the marketplace, with Sigma and Tamron on the rise threatening lens sales, Canon will continue to do what is in Canon's best interest. Automation seems like the logical next step for a company that can afford the investment, and Canon's pockets run pretty deep.


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