Camera Makers Are Still in Throes of Digital Shift

They are some of the most legendary names in photography.

Minolta scored the world’s first successful auto-focus, single-lens reflex camera. Fuji invented 1600-speed film, once the industry’s fastest. Nikon’s fabled F-series made the 35-millimeter camera the picture-taking workhorse for the last half a century.

Now, the companies share a more dubious distinction: abandoning part of the business that made them famous.

Camera makers have battled to adapt to the digital revolution for the last 10 years, but recent retreats by leading brands underline how the industry has turned upside down.

With interlopers such as Sony, Panasonic and Samsung capitalizing on their high-tech know-how, traditional camera makers and their black scrolls of film may soon join 19th century daguerreotypes as museum-shelf curios.

In just the last few years, digital cameras have catapulted from cutting-edge novelties to mainstream must-haves. But with the market poised to plateau, more players are chasing fewer opportunities and the old guard is losing out.

“It’s inevitable that many of the camera manufacturers in the market today will be either bought up or go out of business,” said Ed Lee, an analyst with InfoTrends Inc., a U.S.-based market research group.

More than three-quarters of all cameras sold today are digital, and digital images are expected to account for 90% of all professionally taken photos by 2010, compared with 70% now, according to InfoTrends.

Camera buffs were stunned in January when Konica Minolta Holdings Inc., which traces its roots to 1873, said it was quitting the camera business altogether -- digital and film -- and selling its digital assets to rival Sony Corp.

Nikon Corp. said in January that it would stop making seven of its nine film cameras and concentrate on digital models.

Fuji Photo Film Co., which plans to cut 5,000 jobs, changed directions last month, announcing it would spend nearly $8.5 million to diversify into pharmaceuticals.

Europe’s biggest filmmaker, Germany’s AgfaPhoto, couldn’t adapt at all; it’s now bankrupt and liquidated.

Meanwhile, Antonio Perez, who is leading Eastman Kodak Co. through a four-year digital remake, has warned that Kodak, the pioneer of point-and-shoot photography, is now “at the worst possible place” after a $1.03-billion third-quarter loss.

Kodak, which is cutting as many as 25,000 jobs, is the third-biggest digital camera maker worldwide. But it was slow to shift its focus to digital, quitting the black-and-white paper business only last year.

Many of the big names in photography were once start-ups in their own right as they rushed to market in the 1950s with the advent of 35-millimeter cameras, undercutting and stealing market share from European makers. Now, they are the ones having difficulty adapting to the technology used in digital cameras: image processing chips and sensors called charge-coupled devices, or CCDs, which capture light and transform it into digital signals.

Some names, such as Kodak, Nikon and Olympus, farm out manufacturing of digital cameras to high-tech firms with expertise. Sanyo Electric Co. and Taiwan’s Premier Image Technology Corp. and Altek Corp. are among the ghost makers.

One key exception is Canon Inc., which successfully made the transition from film by investing heavily in digital technology.

Canon shipped about 12.6 million digital cameras in 2004 to lead the world with a 17% market share, according to U.S. market researching company IDC.

The company has leaned on marketing to make sure consumers don’t forget its well-established brand name amid the onslaught of digital newcomers, IDC analyst Chris Chute said. Thus, Canon’s camera division accounted for only 35% of the company’s overall sales last year but 42% of total operating profit.

That performance has helped Canon record six straight years of record profit and boosted its president, Fujio Mitarai, to cult-like status in Japan, where he was tapped to lead Japan’s most powerful business lobby.

Global shipments of digital cameras are expected to peak at 92.7 billion units this year, then start declining because of market saturation, according to IDC. That means a smaller pie to divide among more producers.

Traditional camera makers such as Nikon aim to keep a toehold in high-end digital SLR, or single-lens reflex, cameras. They are favored by professionals, use interchangeable lenses and tend to have higher profit margins. But newcomers such as Matsushita Electric Industrial Co., which makes Panasonic products, are already unveiling their own SLRs.

Meanwhile, camera-equipped mobile phones are crowding the low-end, point-and-shoot market.

And Hewlett-Packard Co. plans to further undercut Kodak and Fuji by supplying retailers with kiosks so customers can simply plug in their digital camera’s memory chip and instantly print pictures. Kodak is the world leader in this field, with 75,000 kiosks, but HP says its system will be cheaper because it’s based on inkjet technology instead of dye sublimation.

“What you’re starting to see is a big shakeout in terms of the folks who have decided to invest in photography and the folks who’ve decided to diversify and stay and the folks who have decided to leave,” Chute said. “Now, we’re in kind of unknown territory.”