Smartphone cameras put pressure on Canon, Nikon

The global camera business, centered in Japan, is headed for a shakeout. With industry revenue falling to the lowest level in a decade amid surging smartphone sales, Nikon, the world's No 2 camera maker, has cut prices to lure consumers. Market leader Canon 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 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 per cent.

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 per cent controlled by Canon and Nikon are slowing as well.

Camera shipments are likely to fall 30 per cent this year to 69 million units, according to Morgan Stanley MUFG Securities., 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 per cent, while Canon lowered profit and sales forecasts in July.