Canon 2006 Annual Report Download - page 57

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picture quality and functions. Profit margins have been
shrinking for the overall industry, but Canon has been able to
maintain higher margins through reforms of its production
and procurement systems.
Canon expects the market for compact digital cameras to
expand in the intermediate term. However, profit margins for
the overall industry are moving lower as prices fall and compe-
tition increases. Therefore, Canon seeks to continue cutting
production costs while expanding sales volumes.
There are signs of rapid growth in the market for compact
photo printers, which present a new business opportunity. By
creating a strong product line over the mid-term, Canon
believes that it will be able to take a significant role in this
market and turn the compact photo printer business into a
new earnings source for Canon.
Canon played a major role in the continued expansion of
the digital SLR market in fiscal 2006. This market is expected to
continue growing for the time being. However, Canon expects
the growth rate to decline over-time .
The market for film cameras is contracting as a result of the
rapid shift to digital cameras. Canon anticipates this trend to
continue, both for film single lens reflex cameras and for film
compact cameras.
Canon expects the interchangeable lens market to grow as
aresult of the rapid market penetration of digital SLR cameras.
Canon aims to expand its sales and market share by introducing
the most suitable products for the digital SLR camera market,
which is expected to continue growing.
For video camcorders, analog camcorder sales have been
further replaced by sales of digital camcorders even in the
United States and Europe, where this transition had been
comparatively slow. Now almost the entire world has made the
switch over to digital. Against this background two new trends
have emerged in the market. First, the introduction of video
cameras using DVDs, HDDs, SD cards and other new forms of
media has resulted in a trend in which convenience offered by
the products is increasingly emphasized. Second, the trend
towards higher picture quality has evolved, provided by products
using high-resolution recording methods such as HDV and AVC
HD. Canon believes that these two trends are stimulating the
market by responding to more diverse user needs, and will likely
contribute to further growth for the overall digital video market.
Canon will seek continued sales growth with a stronger
product line while investing in research and development in
order to better respond to new market trends.
Canon expects that the market for business-use liquid
crystal projectors will continue to grow by about 20% per year
on a unit basis, while market prices will continue to decline,
resulting in almost no growth in monetary terms. In addition to
our independently developed SX50 high-resolution projector
released at the end of 2004, Canon has also introduced the
SX6, 60 and X600 models late in the second half of 2006.
The high picture quality and resolution offered by these
models have won high praise from system integrators, allowing
Canon to capture a large share of the market for high-resolution
projectors. Canon expects to continue to develop distinctive,
value-added products by further improving picture quality,
resolution and brightness.
Optical and Other Products Segment
In the semiconductor-production equipment industry,
equipment manufacturers must provide high quality products
corresponding to rapid technology progress.
Canon will continue to focus on developing new products
which adopt leading-edge technologies, such as immersion
exposure technology and ultra precision processing and
measurement technology.
In the LCD production mask aligner market, Canon will
seek to strengthen its technical capabilities to meet the recent
trend toward larger glass-substrates due to the increasing
demand for larger LCD televisions.
In addition, Canon will continue to make distinctive products
enabling high resolution and high productivity.
In the TV lens market, demand for HDTV, which has grown
in the United States and Japan, is now growing as well in
Europe. In particular, there has been increased demand for
lenses used for broadcasting sporting events and for producing
dramas and documentaries. Canon also expects to see new
demand in China and other Asian markets thanks to greater
progress in digitalization. At the same time, there have been
signs of expanded HDTV applications by the press in Japan and
the United States while Canon already has a major market
share worldwide for this class of lens, it intends to continue to
strengthen its position in this market.
Forward Looking Statements
The foregoing discussion and other disclosure in this report
contains forward-looking statements that reflect management’s
current views with respect to certain future events and financial
performance. Actual results may differ materially from those
projected or implied in the forward-looking statements. Further,
certain forward-looking statements are based upon assump-
tions of future events that may not prove to be accurate. The
following important factors could cause actual results to differ
materially from those projected or implied in any forward-
looking statements: foreign currency exchange rate fluctua-
tions; the uncertainty of Canon’s ability to implement its plans
to localize production and other measures to reduce the impact
of foreign currency exchange rate fluctuations; uncertainty as
to economic conditions, in Canon’s major markets; uncertainty
of continued demand for Canon’s high-value-added products;
uncertainty as to the recovery of computer and related mar-
kets; uncertainty of recovery in demand for Canon’s semicon-
ductor production equipment; Canon’s ability to continue to
develop products and to market products that incorporate new
technology on a timely basis, are competitively priced and
achieve market acceptance; the possibility of losses resulting
from foreign currency transactions designed to reduce finan-
cial risks from changes in foreign currency exchange rate; and
inventory risk due to shifts in market demand.