Canon 2012 Annual Report Download - page 46

Strategy Business Units Management System FINANCIAL SECTION
44
Canon provides warranties of generally less than one year
against defects in materials and workmanship on most of
its consumer products. Estimated product warranty related
costs are established at the time revenue are recognized and
are included in selling, general and administrative expenses.
Estimates for accrued product warranty costs are primarily
based on historical experience, and are affected by ongoing
product failure rates, specific product class failures outside of
the baseline experience, material usage and service delivery
costs incurred in correcting a product failure. As of December
31, 2012, accrued product warranty costs amounted to
¥12,163 million (U.S.$140 million).
At December 31, 2012, commitments outstanding for the
purchase of property, plant and equipment were approxi-
mately ¥39,520 million (U.S.$454 million), and commitments
outstanding for the purchase of parts and raw materials were
approximately ¥65,311 million (U.S.$751 million), both for
use in the ordinary course of its business. Canon anticipates
that funds needed to fulfill these commitments will be gener-
ated internally through operations.
During fiscal 2013, Canon expects to contribute ¥18,610
million (U.S.$214 million) to its Japanese defined benefit
pension plans and ¥21,454 million (U.S.$247 million) to its
foreign defined benefit pension plans.
Canon’s management believes that current financial
resources, cash generated from operations and Canon’s poten-
tial capacity for additional debt and/or equity financing will
be sufficient to fund current and future capital requirements.
RESEARCH AND DEVELOPMENT, PATENTS AND
LICENSES
Year 2012 marks the second year of the Excellent Global
Corporation Plan, its 5-year (2011–2015) management plan.
The slogan of the fourth phase (“Phase IV”) is “Aiming for the
Summit - Speed & Sound Growth” and there are three core
strategies related to R&D:
 •AchievetheoverwhelmingNo.1positioninallcorebusi-
nesses and expand related and peripheral businesses;
 •Developnewbusinessthroughglobalizeddiversification
and establish the Three Regional Headquarters manage-
ment system; and
 •Buildthefoundationsofanenvironmentallyadvanced
corporation.
Canon has been striving to implement the three R&D
related strategies as follows:
 •AchievetheoverwhelmingNo.1positioninallcorebusi-
nesses and expand related and peripheral businesses:
Continue to introduce competitive products through
innovation and aim at gaining profit through solutions
and services.
 •Developnewbusinessthroughglobalizeddiversification
and establish the Three Regional Headquarters manage-
ment system: Reinforce the businesses of commercial
printing sector, medical imaging sector, industrial equip-
ment sector and security and safety sector to develop
into Canon’s new pillars. Seek talents in Japan, US, and
Europe to foster promising technologies and enhance
R&D capabilities in global-scale dimensions by enabling
product development in specialized area of each region,
with actively utilizing M&A.
 •Buildthefoundationsofanenvironmentallyadvanced
corporation: Focus on energy- and resource-conserving
technologies to create products with the highest environ-
mental performance.
Canon has developed and strengthened relationships
with universities and other research institutes, such as Kyoto
University, Tokyo Institute of Technology, Osaka University,
Stanford University, the University of Arizona, the New
Energy and Industrial Technology Development Organization
and the National Institute of Advanced Industrial Science
and Technology to assist with fundamental research and to
develop cutting-edge technologies. Additionally, Canon has
entered into respective collaborative research agreements
with Massachusetts General Hospital (MGH) and Brigham
and Women’s Hospital (BWH) to develop and commercialize
unique medical devices.
Canon has fully introduced 3D-CAD systems across the
Canon Group, boosting R&D efficiency to curtail product
development times and costs. Moreover, Canon enhanced and
evolved its simulation, measurement, and analysis technol-
ogies by establishing leading-edge facilities, including one
of Japan’s highest-performance cluster computers. As such,
Canon has succeeded in further reducing the need for pro-
totypes, dramatically lowering costs and shortening product
development lead times.
Canon’s consolidated R&D expenses were ¥296,464 mil-
lion (U.S.$3,408 million) in fiscal 2012, ¥307,800 million in
fiscal 2011 and ¥315,817 million in fiscal 2010. The ratios of
R&D expenses to the consolidated total net sales for fiscal
2012, 2011 and 2010 were 8.5%, 8.7% and 8.5%, respectively.
Canon believes that new products protected by patents
will not easily allow competitors to compete with them, and
will give them an advantage in establishing standards in the
market and industry. According to the United States patent
annual list, released by IFI CLAIMS® Patent Services, Canon
obtained the third greatest number of private sector patents
in fiscal 2012.
R&D Expenses
(Millions of yen)
400,000
300,000
200,000
100,000
0
20122011201020092008
374,025
307,800 296,464
315,817
304,600