Canon says digital camera market may shrink in '09

The global digital camera market may contract next year, the president of industry leader Canon Inc warned, as sluggish economic conditions dampen consumer demand.

Tsuneji Uchida also said that Canon was aiming to cut $1 billion in costs with a new computer system to be completed by 2010 and that he was in no rush to join an acquisition spree by other cash-rich Japanese firms.

The economic slowdown has started to hit sales of digital single-lens reflex (SLR) cameras - high-end models that use interchangeable lenses - but overall Canon's camera sales are solid ahead of the year-end shopping season, Uchida said.

The outlook, however, has become increasingly murky and the $40 billion digital camera market may shrink next year in unit terms, Uchida said, a development that would heighten the risk that Canon's earnings downturn stretches into 2009.

"We hope we will see the same level of demand next year as this year," Uchida said in an interview conducted on Friday and embargoed from publication until Tuesday. "Whether or not that will become reality is up to economic conditions."

Global digital camera demand grew 24 percent to 130.7 million units in 2007, according to research firm IDC, and Canon and its top rivals, which include Sony and Nikon are still forecasting sales growth this year.

Canon last month cut its 2008 compact digital camera sales forecast by 6 percent to 23.5 million units, though that would still mark a year-on-year jump of 10 percent. It stood by its estimate for SLR sales to rise 38 percent to 4.4 million units.

Demand for SLR cameras has grown strongly over the past few years, spurred on by a drop in prices that has expanded the customer base beyond professional and advanced amateurs.

That has meant big profits for Canon and Nikon, which dominate the high-margin segment of the market.

Uchida said SLR demand was starting to show signs of "stagnation" but that it was not enough to knock its overall camera sales forecasts off track.

"According to our internal data, recent sales appear to have been fairly good ... no worse than we had thought," he said. "In fact, we saw our products gain some market share last week."

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