High-End Cameras Fall Prey to Smartphones

High-End Cameras Fall Prey to Smartphones

Canon, Nikon Lower Full-Year Sale Forecasts for Interchangeable-Lens Cameras

JURO OSAWA

Updated Nov. 7, 2013 7:41 p.m. ET

Declining sales of high-end cameras and lenses are raising an alarming question for companies like Canon Inc. 7751.TO -0.65% and Nikon Corp. 7731.TO -5.42% : Could the proliferation of camera-enabled, app-heavy smartphones be crushing not only the simple point-and-shoot, but premium models as well? This year, shipments of what’s called “interchangeable-lens cameras”—high-end models that let users swap out different lenses—are diving suddenly after years of robust growth. Most of those are digital single-lens reflex, or DSLR, cameras—the bulky models used by professional photographers and enthusiasts.Research firm IDC expects shipments of such cameras to fall 9.1% to 17.4 million units from 19.1 million units last year.

During the past few weeks, Canon and Nikon—two of the world’s biggest makers of high-end cameras—both lowered their forecasts for sales in the fiscal year ending in March. Major lens maker Tamron Co.7740.TO -1.59% , seen as a bellwether for the market, sold 22% fewer interchangeable lenses in the first nine months of this year than it did a year earlier, forcing it to lower its profit outlook last week.

Just what’s behind the decline is unclear. Canon, Nikon and Tamron point to a weak global economy and inventory buildups.

“We are seeing tough figures at the moment, but I don’t think this will last forever,” said Nikon Chief Financial Officer Junichi Itoh, at an earnings news conference on Thursday. “There still is potential demand, and I think China is the key.”

But the example of Lie Fhung suggests consumer tastes could be changing too. The Hong Kong-based artist and graphic designer says she now rarely uses the Canon DSLR camera that she bought five years ago. Instead, Ms. Fhung, 44, takes most of her photos with her iPhone, and satisfies her urge to manipulate the images with a bevy of photo-editing apps.

When the editing process is complete, she posts her snapshots straight from her phone to photo-sharing app Instagram, where she has nearly 1,600 followers. Ms. Fhung says she has no plans to replace her aging Canon.

“I like using different apps to play with the texture of photos,” she says. “It’s my hobby.”

This wasn’t supposed to happen. Camera makers have argued that although smartphones and mobile devices have decimated sales of cheap, compact cameras, premium products shouldn’t be affected, since they offer a level of control and picture quality that a smartphone’s tiny lens and sensor can’t replicate.

“Taking photos with smartphones and editing them with apps is like cooking with cheap ingredients and a lot of artificial flavoring,” says Canon spokesman Takafumi Hongo. “Using interchangeable cameras is like slow food cooked with natural, genuine ingredients.”

But other market watchers say there are signs the popularity of mobile devices could be eroding sales in the cheaper, “entry” part of the high-end lineup.

Christopher Chute, a digital-imaging research director at IDC, says he’s finding that some consumers are choosing to spend money on smartphones and tablets rather than good-quality stand-alone cameras.

Died-in-the-wool camera buffs may continue to replace their gear, but the potential loss of some newcomers would be a serious issue for the industry, he says.

As more consumers evaluate gadgets based on software and how well it connects to the Internet rather than hardware, the benefits of high-end cameras may become less obvious, he says. “Using software, you can literally create effects of different kinds of cameras,” Mr. Chute says.

Even lens maker Tamron has acknowledged a potential problem, although it doesn’t blame that for the recent decline in sales. “Smartphones pose a threat not just to compact cameras but entry-level DSLRs as well,” general manager Tsugio Tsuchiya said in a phone interview.

Some analysts say the impact on high-end cameras from smartphones and apps is exaggerated. “Whenever the market declines, people tend to try to come up with structural reasons,” says J.P. Morgan JPM -0.86% analyst Hisashi Moriyama.

Camera makers have argued that people who get hooked on photography through smartphones and apps could later move on to purchase better cameras, as they become more serious hobbyists.

Still, the pessimistic view that smartphones are hurting even interchangeable-lens cameras won’t go away unless sales start picking up firmly again, says UBS Securities analyst Ryosuke Katsura.

Shares of Canon, which two weeks ago said it expected to sell 8 million interchangeable-lens cameras this year, instead of the 9 million it forecast in July, have declined 7.3% since January, even as Japan’s benchmark Nikkei 225 stock index gained 37%. Nikon’s shares have fallen 29% this year.

In August, Mr. Katsura lowered his digital-camera market forecasts for this year and the next. Mr. Katsura doesn’t think smartphones will kill stand-alone cameras, but he isn’t completely ruling out the possibility.

“The industry is at a turning point right now, so no scenario is impossible,” he says.