Nikon recently released its annual results This is a key metric in determining how well a manufacturer is doing financially in the short-term and implementing its medium-term strategy. The quick conclusion is that it makes more money, but has a worryingly low camera market share. What does this mean for its future?
Nikon has had a rough time over the past decade, both as a camera maker and — more broadly — as a company. As I pointed out earlier this year, Nikon appears to be caught in a ‘perfect storm’‘ and trying to ‘be a Houdini’ to get out of the difficulties I’m having now.
Leading the industry with the first fully integrated single-manufacturer DSLR in the form of the D1, but then stumbled on two fronts.
First, its imaging division believes that DSLRs are omnipotent, while mirrorless cameras are only for the compact, low-value market. On the surface, it seemed like a reasonable proposition when it released the 1 System in 2011. Pocket interchangeable lens cameras (ILCs) are an interesting topic. Until, that is, Sony released the Alpha 7, and the balance of power was increasingly tilted toward mirrorless cameras. The timing is unfortunate, as Nikon’s revenue peaked at 1,010 billion yen ($8.78B) in 2013, suggesting the DSLR boom will continue. The intervening years clearly showed that this was not the case.
Second, Nikon’s situation is exacerbated by its over-reliance on its imaging department. In 2013, 75% of its revenue came from it, and Nikon’s problems multiplied as camera sales plummeted.The ultimate goal is to make Imaging profitable again, and diversify its business That way it doesn’t become overly dependent on any one department; that’s a strategy it’s been pursuing since around 2015.
Nikon’s year in a nutshell
Nikon’s game plan is to cut back on the 1 System, slash production of compact cameras, gradually shut down production of DSLRs and lenses, and roll out its Z system. The key to success is grabbing market share in the ever-expanding mirrorless market, however, that’s what it’s been trying to do. It didn’t help that COVID-related production shutdowns and parts shortages impacted manufacturing. While consumers have left during the lockdown, demand for high-end models is now surging. So how has it fared over the past year?
Perhaps crucially, it saw a post-pandemic rebound, with revenue rising to 540 billion yen from 450 billion yen last year, but slightly below expectations. Importantly, the operating profit was 50 billion yen, compared with a loss of 56 billion yen last year, and is now turning a profit. Nikon should be congratulated for the draconian cost-cutting it took to restore its status.
More importantly, for the photography industry, how did the Imaging Division perform? Revenue reached 178 billion yen, up from 150 billion yen last year, and represented 33% of the business, down slightly from last year. Profits have recovered (19 billion yen) and Imaging appears to have gotten out of the red and is now fully contributing to the bottom line. The Precision Equipment segment remains Nikon’s largest single group (39%) and has a healthy operating profit.
In terms of details, Nikon reduced its shipments of compact cameras from 260,000 units last year to 190,000 units this year. Back in 2016, Nikon shipped more than 3 million units, so this is a significant shift that reflects the changing nature of the consumer market. In short, compact cameras have become a niche — and increasingly valuable — product category.
For ILC, Nikon reported shipments of 700,000 units (from 5.12 million markets), or about 13% of the market.Notably, this is a reduce Compared to last year (from 840,000), although both revenue and profit are up. The most important aspect is the difference between DSLR and mirrorless models, and unfortunately, Nikon doesn’t provide this level of detail, making it more difficult to determine how its mirrorless strategy will perform.we do from BCN Awards Nikon’s failure to crack the top three sales in the mirrorless market in Japan means its share is less than 13%, while its DSLR share drops to 34%.
Remarkably, Nikon reported that parts shortages were – at least in part – responsible for the decline in shipments, mainly affecting their DSLR lineup. That would explain the drop noted by the BCN Awards, which does not bode well for shipments in the coming year. What does this mean for its mirrorless shipments?we do know Z9 sells well in North Americabut it’s a small segment where the Z9 is really the only full-fledged professional body, and – as i mentioned before – reflects a Monthly production is low, about 3,500 units.
Back in 2020, Nikon estimates 8% of mirrorless market Shares, which represent about 250,000 units, on the surface, this doesn’t appear to have changed much. DSLRs account for the largest share of its ILC shipments, and a troubling parts shortage is affecting its production. While Nikon is desperate to sell more mirrorless cameras, its DSLRs are still an important source of revenue. That said, it clearly states that mirrorless sales have grown in the pro/hobbyist segment, although it’s hard to know how this relates to overall sales. The increase in revenue and profit was successful due to an increase in foreign exchange and average selling price (reflecting a model selling higher value and price increases).
Nikon’s year ahead
Nikon’s short-term goal is to increase revenue to 620 billion yen, eventually returning it to pre-pandemic levels. Imaging is expected to reach 210 billion yen due to mirrorless sales and foreign exchange impacts.This limited revenue growth partly reflects ongoing supply chain issues for DSLR models, but given that ILC shipments have actually Decrease Revenue can only grow by shipping more expensive models and raising prices. Nikon plans to maintain shipments of 700,000 ILCs, which is worrying when the mirrorless market is actually growing and may see market share decline.
As such, market share remains the biggest issue for Nikon, which needs to work hard to increase its production of mirrorless cameras. That said, DSLRs are still an important segment, and a shortage of parts has caused it to lose market share from Canon and Pentax. It’s a rare opportunity for a big land grab and — if strategically done — might give Pentax some respite. The fortunes of camera makers could change a bit in 2022 as the global economy really begins to recover.
Image Source: Header photo via Nikon