Nikon gives DSLR 4 years?

Started Jul 15, 2013 | Discussions thread
Eamon Hickey
Veteran MemberPosts: 3,103
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Re: Nikon gives DSLR 4 years?
In reply to bobn2, Jul 27, 2013

Bobn2 wrote:

mgm2 wrote:

Remember to put Nikon's quotes into context. Their imaging business (cameras, lenses) accounts for over 74% of their total sales.

That can change very quickly. The other mainstay of their business is semiconductor equipment, and in that business 5 or 10 sales extra would suddenly change it from 26% of their revenue to 50% or more.

[snip]

So, it's quite possible that we will see the percentage of Nikon's turnover due to cameras will dip quite soon.

Your point is no doubt correct, Bob, and I'm sure Nikon will welcome it if it happens. I'll just jump off from your point and add that I think Nikon is probably still interested in finding some alternatives to cameras and steppers that could be a substantial and reliable revenue source. The stepper business -- i.e. semiconductor equipment -- has proved a fickle mistress for Nikon.

When I went to work for Nikon USA's camera division in late 1991, the stepper division was just about at the peak of a 10-year ascendancy within the overall Nikon organization. (Acting loosely at the direction of the Japanese Ministry of Trade and Industry, Nikon made Japan's first stepper -- indeed, almost certainly the first stepper made outside of the U.S. -- in 1980.)

Stepper revenue had surpassed camera revenue at Nikon for the first time in 1989, and the business was very profitable. More than that, I think, it really fit Nikon's core personality -- success in that business is much more about engineering expertise and precision than about marketing cleverness, and that's not anywhere near as true of any consumer products business, including cameras. Nikon was not very good at consumer marketing in those days (it's better now but still no great shakes).

By the time I joined the company, in senior management's mind, steppers were the golden child and cameras were definitely the neglected stepchild. This is one of the hidden reasons why Canon was able to catch and then overcome Nikon in the high end of the 35mm camera business in the period from about 1990-1995; in the late 1980s, Nikon had neglected camera R&D in favor of the stepper business and found itself lagging in crucial technologies, most notably autofocus, and in advanced production techniques. The President of Nikon Corp. (that's Japan) obliquely acknowledged this to us all, and apologized for it (again obliquely) in a speech at a U.S. national sales meeting later in the 1990s. (We'd had a very rough few years of trying to sell a marginally competitive, often overpriced, and woefully backordered product line.)

But in 1992, there was a crash in the semiconductor market, and the stepper division made huge losses, dragging Nikon Corporation into the red for the first time in its then 75-year history. After that, the size of the worldwide stepper market was pretty cyclical. In good years, it was good -- and steppers accounted for more than 60% of Nikon's revenues in 1996 compared to about 25-30% for cameras -- but it could shrink dramatically from one year to the next. At the same time, ASML began its impressive rise, so Nikon had much stronger competition than ever before.

As a result, cameras came back into favor (that was what the President of the company was telling us in the speech I mentioned above). Partly, the overall market size was more predictable, which management valued, but also the digital explosion was beginning, and cameras turned out to be a big growth business.

And in contrast to the fat camera profits of the digital era (so far) my sense is that steppers have been very inconsistent over the past decade or so, profitable some years and loss-making in others.

Bottom line is that I've got a pretty sure sense that Nikon management felt burned by their initial infatuation with steppers, and I'm fairly certain they don't want to put too many of their eggs in that basket again.

Nikon has almost unmatched optical expertise, but it hasn't done a great job of evolving that expertise into some other big optical markets (like medical (a la Olympus) or printing and copying (a la Canon and Ricoh)). I think if they could turn back the clock to the 1970s, when Japan's government arranged for Nikon to work on optical micro-lithography (steppers) and midwifed other companies into other optical businesses (i.e. medical, xerography, printing et. al.), Nikon might lobby for a different direction, knowing what they know now.

Anyway, a long way of saying: I think they'd like to find one or two other really good optical businesses, besides cameras and steppers.

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