Canon 2007 Annual Report Download - page 59

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Canon is striving to achieve these strategies as follows:
• Realize an overwhelming No.1 position worldwide in all
current core businesses: Product R&D divisions will work
together with the corporate R&D headquarters to bolster
product competitiveness through development of
extremely superior next-generation products.
• Expand operations through diversification: Canon is study-
ing existing technologies to expand business domains.
Furthermore, Canon will continue to develop various types
of displays, such as Surface-conduction Electron-emitter
Display (“SED”) and Organic Light-Emitting Diode displays
(“OLED”), in order to realize “cross-media imaging”—a
sophisticated combination of imaging input and output
equipment for data, still images and video that allows
users to intuitively process images and information in any
context in daily life or industry.
• Identify new business domains and accumulate necessary
technological capabilities: Canon established a “Strategic
Committee for New Domains.” As a result of discussions
in that committee, Canon targeted the “medical sector”
and “intelligent robot industry” as new business domains,
and “safety technology” as a common base technology,
and recommended strengthening research and develop-
ment of related technologies. In addition, Canon is devel-
oping and strengthening relationships with universities
and other research institutes, such as Stanford University,
Kyoto University, Tokyo Institute of Technology and the
National Institute of Advanced Industrial Science and
Technology, to carry on fundamental research and
develop cutting-edge technologies.
Canon has utilized 3D-CAD systems for some time in
boosting R&D efficiency to curtail product development times
and costs. Moreover, Canon enhanced and evolved its simula-
tion, measurement, and analysis technologies by introducing
leading-edge facilities including one of Japan’s highest-
performance cluster computers. As such, Canon has succeeded
in further reducing the need for prototypes, dramatically lowering
costs and shortening product development lead times.
Canon has R&D centers worldwide, and each of our R&D
centers, with its expertise, is collaborating with other centers to
achieve synergies, and cultivating closer ties in fields ranging
from basic research to product development.
Canon’s consolidated R&D expenditures were ¥368,261
million (U.S.$3,230 million) in fiscal 2007, ¥308,307 million in
fiscal 2006 and ¥286,476 million in fiscal 2005. The ratios of
R&D expenditure to the consolidated total net sales for fiscal
2007, 2006 and 2005 were 8.2%, 7.4% and 7.6%, respectively.
Canon believes that new products protected by seminal
patents will not easily allow competitors to catch up with it,
and will give it an advantage in establishing standards in the
market and industry. According to the United States patent
annual list, which IFI CLAIMS®Patent Services released, Canon
obtained the third greatest number of private sector patents in
2007. This achievement marks Canon’s sixteenth consecutive
year as one of the top three patent-receiving private-sector
organizations.
RECENT DEVELOPMENTS
Canon Marketing Japan Inc. acquired shares of Argo 21
Corporation (listed on the Tokyo stock exchange), which
possesses an advanced IT solution business, through a tender
offer and it became a consolidated subsidiary as of June 21,
2007. Subsequently, Canon Marketing Japan Inc. acquired all
of the remaining issued and outstanding shares of Argo 21
Corporation as of November 1, 2007 through a share exchange.
With Argo 21 as a wholly-owned subsidiary, Canon Marketing
Japan Inc. aims to strengthen its IT solutions business. In
conjunction with this transaction, Argo 21 Corporation has been
delisted from the Tokyo stock exchange on October 26, 2007.
Canon acquired shares of Tokki Corporation (listed on the
JASDAQ stock exchange), which possesses advanced display
technology, through a tender offer and a third party allotment,
and made it into a consolidated subsidiary as of December 28,
2007. With Tokki Corporation as a subsidiary, Canon aims to
accelerate the development of its display business.
On February 27, 2008, Canon entered into a stock purchase
agreement with Hitachi, Ltd. (“Hitachi”) to acquire shares of
Hitachi Displays, Ltd. (“Hitachi Displays”), a wholly-owned
subsidiary of Hitachi, with the aim of accelerating ongoing
development of organic light-emitting diode (“OLED”) displays,
ensuring stable procurement of LCD panels and facilitating
product development. Under the terms of this agreement, the
Company will acquire a 24.9% stake in Hitachi Displays by
March 31, 2008, pending regulatory approval.
As the next step, Canon plans to acquire additional Hitachi
Displays’ shares and make Hitachi Displays a Canon subsidiary.
MARKET RISK EXPOSURE
Canon is exposed to market risks, including changes in foreign
currency exchange rates, interest rates and prices of marketable
securities and investments. In order to hedge the risks of
changes in foreign currency exchange rates, Canon uses
derivative financial instruments.
R&D Expenditure
(Millions of yen)
400,000
0
03 04 05 06 07
259,140 275,300 286,476
308,307
368,261