(Corrects data source in paragraph 15)
By Sophie Knight and Reiji Murai
TOKYO Aug 23 Nosy governments and nervous
homeowners, among other drivers of the surveillance society, may
soon upstage amateur photographers as the focus for big camera
makers such as Canon Inc who spot growing opportunities
in the security market.
Canon, the industry leader, has been hit with a sudden
downturn in shipments of its top-end digital cameras, an
increasingly saturated market sensitive to the recent slowdown
in emerging economies and with a receding pace of innovation.
Add to that a compact camera market that has been battered
by smartphones with increasingly high-resolution cameras, and
companies like Canon have been left scrambling for new markets.
"A major focus for the next phase is increasing our
business-to-business (B2B) sales, and of course security cameras
- which is a huge market - is part of that," Canon President and
CEO Fujio Mitarai said in an interview.
Canon is looking beyond digital cameras - the last consumer
gadget industry still dominated by Japan Inc - and targeting
industrial and corporate clients, much like Japanese peers such
as Panasonic Corp which fell prey to foreign
competition in TVs and other consumer electronics.
Canon sees surveillance cameras, which research firm IHS
forecasts will swell by two-thirds to a global market of $23
billion by 2017, as a wide-open playing field with no dominant
suppliers and an ideal target for its B2B ambitions.
The company, which counts the U.S. Secret Service as a
customer, aims to reach annual sales from the sector of about $1
billion during its next five-year plan from 2016, Mitarai said.
Panasonic said its security camera division posted sales of
13.4 billion yen ($136 million) in the latest quarter and it was
aiming for annual growth of 15 percent. Sony Corp said
it was also aiming to leverage its image sensor technology to
become a major player in the sector.
B2B, OR NOT TO BE?
The market is booming as concerns mount over crime and
security, even as headlines stir worries about covert
governmental and corporate surveillance operations.
Japan is the third-biggest market for security cameras
behind China and the United States, with the switch to networked
digital systems from analogue CCTV devices stimulating demand
even in saturated markets such as Britain, which had one
surveillance camera for every 16 people in 2012, according to
"The market is growing quite quickly, and is forecast to
grow the most in Asia," said Jon Cropley, principal analyst for
video surveillance at IHS. "But it's a highly fragmented and
competitive market with lots of companies involved. Coming up
with a unique selling point can be difficult."
Canon says its lens and sensor technology will position it
well to shoot to the top of the sector, which is packed with
smaller firms but few major players besides Sweden's Axis AB
It faced a similar challenge when it targeted the
then-fledgling digital camera market more than a decade ago: a
fast-growing, fragmented market that was just beginning to
mature, when it marched in with a broad product line and
proceeded to dominate it. Canon claimed more than a fifth of the
total digital camera market in 2012, and 43 percent of the
high-end market for interchangeable-lens cameras.
But this year their reliable high-end camera business has
turned unexpectedly sour, with analysts reversing a double-digit
growth forecast to a double-digit decline.
Worldwide shipments of Canon's interchangeable-lens cameras
fell 6.7 percent in the first six months of this year, a sharper
decline than the industry average of 5 percent, according to
International Data Corp (IDC).
"It appears over the past nine months the interchangeable
market has entered a new phase of maturity," said Chris Chute,
research director of digital imaging at IDC, which last week
reversed its forecast for the market of an 11.9 percent increase
to an 11.3 percent drop.
"A strategy that camera companies have to take is to
diversify away from one of their traditional reliably profitable
markets," Chute said. "If anything, I see Canon being one of the
leaders moving away from the consumer sector."
Mitarai, who returned to the helm last year to help turn
around a slide in profit, says he is already steering the
company in that direction in the hope of reducing its dependence
on the consumer market for 70 percent of its sales.
He also said the company is constantly on the lookout to
spend some of its 700 billion yen ($7.1 billion) cash pile on an
M&A deal to achieve that - whether in security cameras or in
another of the cutting-edge technologies it is exploring.
"Security cameras are going to become an important pillar
for us," Mitarai said. "We've already made it a separate
division, and think that the global market has limitless
possibilities for growth."
($1 = 98.6050 Japanese yen)
(Editing by Edmund Klamann and Ian Geoghegan)