Smartphone cameras at 41 Megapixels pressure Canon, Nikon

With industry revenue falling to the lowest level in a decade amid surging smartphone sales, Nikon Corporation, the world’s No 2 camera maker, has cut prices to lure consumers.

Bloomberg News reported that market leader Canon Incorporated may follow suit to keep pace, according to UBS AG, putting pressure on smaller producers and possibly leading them to retreat from the business.

“There are too many players,” said Ryosuke Katsura, an analyst at UBS in Tokyo. “It’s going to be tough for smaller camera makers even to remain in the business as competition between Canon and Nikon will likely intensify,” said Katsura, who recommends selling shares of both industry leaders.

Since Apple Incorporated introduced the iPhone in 2007, Canon and Nikon stocks have lost more than half their value as demand has withered in an industry they have dominated for over a decade. Nikon is the worst performer in the Nikkei 225 index this year, falling 34 percent.

Sales of compact models have slumped as smartphones displace the point-and-shoots that were the biggest part of the market. Now higher margin single-lens reflex models – a market 80 percent controlled by Canon and Nikon – are slowing as well.

To keep sales moving, Nikon has been discounting many models. The Nikon 1 J2, introduced a year ago, now sells for as little as 23,485 yen ($240), 64 percent below its initial price, according to Japanese online comparison site The high-end D600, also introduced last September, has declined 26 percent to 145,975 yen.

Camera shipments are likely to fall 30 percent this year to 69 million units, according to Morgan Stanley MUFG Securities Co., even as manufacturers try to slow the decline by adding smartphone-like features such as Wi-Fi and Bluetooth. Nikon in August cut its 2013 net income target by 23 percent while Canon lowered profit and sales forecasts in July.

Nikon says it cut prices to reduce inventory as demand falls, and that the company is scaling back production to boost profitability. Canon says it doesn’t plan to chase short-term market share gains by cutting prices.

Founded in 1917, Nikon supplied binoculars and optical gear to the Japanese military. After World War II the company focused on consumer products and in 1959 introduced its first SLR camera with an interchangeable lens, the Nikon F. Today it gets 84 percent of operating profit from imaging.

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