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Canon released their first quarter financials
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Canon released their first quarter financials

Canon released their first quarter financials for this year, and as expected by this prior report, the results are certainly not good when it comes to the imaging department as a whole.

The Canon faced a 19% downturn to selling only 850,000 cameras in the first quarter of the year.  Canon blames this on the softening of the lower end market due to smartphones becoming better.

The habit of capturing images with smartphones with improved cameras has become a part of daily lives of consumers. As a result, the market for entry-level DSLRs is contracting at a pace that exceeds the outlook we had at the beginning of the year.

While no matter how good ILC cameras become, they simply can't replace the carry with you everywhere convenience of a smartphone.  I see many people take this as a sign of lack of innovation with Canon products as being a root cause.  Frankly, I find that simply ignores the basic fact that you can slip a smartphone into any pocket with image quality that is more than good enough for the vast amount of use cases of the images which revolve around social media or in camera viewing on a screen of 6 inches or less.

No matter how innovative the ILC or compact camera becomes, it simply cannot and will never compete in that same market as the smartphone.  The only way Canon could compete in that market is if Canon starts manufacturing smartphones.  

Outside of that, Canon also faces problems when it comes to the higher end market as well; Canon is faced with sales pressure because of;

  1. A lack of perceived innovation
  2. Lagging behind competitors in 4K video technology
  3. For stills, the majority of cameras sold are good enough, people are not upgrading their cameras as often.
  4. Disruption of the market by introducing the RF mount

Most of these talking points we've discussed in the past in various articles.

All is not bad for Canon though.  Their mirrorless sales "greatly exceeded" the overall market (I assume the mirrorless market);

In the first quarter as well, we grew our unit sales of mirrorless cameras at a pace far exceeding the overall market, thanks to such new products as the EOS M50 and EOS R. Additionally, at the end of the quarter, we further enhanced our lineup, with the launch of the EOS RP, a smaller and lighter mirrorless camera equipped with a full-frame sensor and the same new mount found on the EOS R. Additionally, we plan to release six new models of RF lenses within the year. Users have not only praised the performance of these bodies and lenses, but also expressed their high expectations for the R system overall having felt our sense of urgency in strengthening our lineup over a short period of time. We will work to maintain sales growth of the EOS RP, which got off to a flying start, while also successively launching new RF lenses as we work to further stimulate sales of our strengthened mirrorless lineup.

Canon who usually does a fair job of predicting how the overall camera market will fair for the year also came up with a stunning prediction that the overall market will fall down to 8.6 million units by the end of this year. Last year 10.3 million units were sold. This represents a slide of over 16% of the overall market.

Canon is not expecting this to be all Canon losses (a narrative that some will certainly suggest), but they are predicting that their marketshare will actually slightly increase this year to around 49%;

In light of these circumstances, we decided to reexamine our full-year projections for the market and our own unit sales. We now expect the market and our own unit sales to decline 17% to 8.6 million units and 4.2 million units, respectively.

It's not hard to find some of the causes of this;

  1. the massive market disruption caused by the RF and Z mounts from Canon and Nikon respectively
  2. more and more vendors are going upmarket and raising prices

I think that point 2 needs to be explained in more detail on why this is not a good thing.  I've noticed in quite a few forums that the narrative that greater margins and increasing prices are a good thing.  Personally, I think this is looking at it from the short term approach. While it's good to have good profitability and your shareholders demand that, it's also good to grow the market.  Selling more and more upmarket items simply exasperates the already significant last camera syndrome being faced by the manufacturers.  Over time, it's simply self-defeating.

This report for some will be a celebration of Canon's fall, but it shouldn't be.  What Canon is stating in here is that there are problems for the entire industry and that the industry as a whole is going to take a big hit this coming year.

You can download all of Canon's financial information here

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