Canon 2013 Annual Report Download - page 46

Strategy FINANCIAL SECTION
44 Corporate DataBusiness Segment Corporate Structure
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, 2013, accrued product warranty costs amounted to
¥10,890 million (U.S.$104 million).
At December 31, 2013, commitments outstanding for the
purchase of property, plant and equipment were approxi-
mately ¥26,218 million (U.S.$250 million), and commitments
outstanding for the purchase of parts and raw materials were
approximately ¥73,914 million (U.S.$704 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 2014, Canon expects to contribute ¥13,589 mil-
lion (U.S.$129 million) to its Japanese defined benefit pen-
sion plans and ¥7,060 million (U.S.$67 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 2013 marks the third 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 is pursuing collaboration among the government,
industry and academia, and has strengthened relationships
with universities and other research institutes worldwide,
such as Kyoto University, Tokyo Institute of Technology, Osaka
University, Stanford University, the University of Arizona,
and the New Energy and Industrial Technology Development
Organization to assist with fundamental research and to
develop cutting-edge technologies. Additionally, Canon
is currently working on a collaborative research with
Massachusetts General Hospital (MGH) and Brigham and
Women’s Hospital (BWH) to develop biomedical optical imag-
ing and medical robotics technologies at the Healthcare
Optics Research Laboratory in Cambridge, Massachusetts,
founded in June of 2013.
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 ¥306,324 mil-
lion (U.S.$2,917 million) in 2013, ¥296,464 million in 2012
and ¥307,800 million in 2011. The ratios of R&D expenses to
the consolidated total net sales for 2013, 2012 and 2011 were
8.2%, 8.5% and 8.7%, 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.
Canon obtained the third greatest number of private sec-
tor patents in 2013, according to the United States patent
annual list, released by IFI CLAIMS® Patent Services.
R&D Expenses
(Millions of yen)
400,000
300,000
200,000
100,000
0
20132012201120102009
307,800 296,464 306,324
315,817
304,600