Why Canon Is Closing Its China Factory and What It Means for the Industry

In another month, another camera manufacturer stopped producing it. This time it is Canon with its remaining factory in China, and it can now be confirmed that it has gone further and will shut down – halting all manufacturing and shutting down the factory.

This should come as no surprise given the way the camera market is changing, and in fact, surprisingly, it’s not happening soon.

Canon announces the end of its camera factory in China

Earlier this week, Canon announced it was shutting down production at its plant in Zhuhai in southern China, on a large scale as a result of an ongoing contraction in the camera market, ongoing problems with COVID-19, and related chip shortages.

Here is a statement Canon provided to PetaPixel regarding the shutdown:

It is true that manufacturing at Canon Zhuhai will cease. Under the guidance of Zhuhai city government and high-tech zone authorities, discussions with Canon Zhuhai employees, suppliers and other affiliated parties are currently underway. As these discussions are currently ongoing, we cannot disclose any information yet. Further announcements will be made if and when necessary.

The unit was established in Zhuhai in 1990 and is Canon’s only factory in mainland China to manufacture digital cameras. Canon also makes (many) cameras in Taiwan and at the Oita, Miyazaki, and Nagasaki factories in Japan. Oita is its main camera manufacturing plant that produces DSLRs, EF lenses and camcorders, with more than 4,000 employees. It also leads in building and testing prototypes.

It is difficult to know exactly what was made in Zhuhai, but as stated in South China Morning Newspaper, Canon China public relations representative Shen Yue commented that “due to the development of the smartphone, the market for compact digital cameras is shrinking.” the Global Times It reported, based on a source, that the facility “mainly collects small digital cameras.”

Built-in camera puzzle

I recently commented on how shipments of cameras will spread in 2021 for manufacturers based on CIPA’s shipment data. It looks like 2021 will be a new low in terms of total units shipped at 8.3 million units, down from that astounding high of 120 million units in 2010. However, this masks a decreasing but largely stable level for ILC shipments. These were originally DSLRs but are now pretty much unparalleled models.

The collapse in camera shipments came from the compact camera portion (AKA) created by the “heap high, sell it cheap” mentality nowadays. Let’s look at it in more detail.

Built-in camera shipments
Planned by CIPA.

What this clearly shows is the massive increase in shipments in the early 2000s as compact cameras fell in price and became desirable consumer purchases. The market has expanded exponentially with good – but diminishing – margins.

Camera segment revenue was primarily driven by sales of compact cameras which is one of the reasons for the massive expansion of new mirrorless cameras in the early 2010s as every manufacturer released new systems and Pentax released two! However, by following the principle of “the higher they are, the harder they fall,” the industry collapsed. Unit shipments were maintained until 2011 but the value is already beginning to decline.

After four short years, a sector that was worth 1,600 billion yen (~$14 billion) was reduced to about 300 billion yen (~$2.64 billion). Integrated cameras have seen a decline year on year, but 2021 will mark the first time that compact cameras weren’t the single largest category in terms of unit shipments (and it’s worth noting that—by value—that lost cap to the DSLR segment in 2013).

With a potential to ship just 3 million units, mirrorless cameras are now the largest single segment (38%), but what this hides is that mirrors make up 67% of the shipping value, and potentially have better profit margins.

In short, compact cameras are Turkey because they have declining shipments and low margins, and are not a sector for tech leaders.

Canon markets in the camera industry

What does this have to do with Canon? The chart below shows the market share of the compact camera as reported by the BCN Awards. Online and in-store sales data is collected by BCN Retail, although this is only representative of the Japanese market and retailers reporting to BCN.

The data is believed to account for about 40-60% of domestic Japanese sales, which itself represents about 15% of total shipments (as recorded by CIPA). Understanding Japan can help us fully understand the market.

BCN . Integrated Market Share
Graph by BCN Retail.

What this shows is that Canon has, by far, the largest market share. This sounds good at face value, but what it does show is that Canon is investing heavily in the compact camera market, which as we’ve seen earlier has been declining in relatively low value shipments.

It’s a point Nikon understands well, as it has closed and merged many of its overseas plants and essentially halted production of all combined units. If you take a look at the company’s website, you will now find only seven exhibitors; Four bridge cameras (ultra-zoom), two point-and-shoots, and one shock-resistant model. Conversely, Canon offers 13 models, and a range of compact and bridge Powershot and Ixus cameras.

It’s also worth noting that Nikon threw in the towel with its System 1, and realized at one point that this was a dead horse’s skin. There is only room for one mirrorless system and for Nikon and that means the FX and DX versions of their System Z.

There is still considerable debate about the future of the Canon EOS-M, and while Canon has stalled on a clear statement of intent (ie either killing it or expanding it), users are likely to look at other camera systems.

All this brings us back to the Zhuhai Factory and its closure. With so many Canon compact models being produced, the writing will appear on the wall for at least some of Canon’s current compact cameras. We know that the factory produces about 1 million cameras and 12 million lenses. Given Canon’s 40% share of the Japanese market, it’s possible that it shipped as many as 1.2 million units last year worldwide.

Are we about to see a significant reduction in the range of a compact camera? Is it also possible that the EOS-M has reached the end of its life? The dust is still settling when this particular factory shuts down, but it seems likely that it will mark a major shift in Canon’s imaging department and the cameras it produces.

The future is the mirrorless camera and manufacturers are restructuring to make this the focus of their business and, most importantly, a profitable business.

Image credits: Illustration licensed by Depositphotos

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