Newcomers trying to break into the retail digital camera market have a hard task ahead of them, industry insiders have warned. Established camera makers, particularly in Japan, still hold all the cards - among them tremendous brand value, built up over decades.
Taiwanese companies are now the world's largest source of digital still cameras, making 32m, or over 40 per cent of the global market. And they "will probably reach 48 to 50 per cent of world market share" in 2006, predicted Marty Kung of the Market Intelligence Center (MIC), a research organisation based in Taiwan. But almost all of this prodigious output is sold under other brand names, typically those of Japanese and US companies. Only about four per cent of the cameras made this year by Taiwanese companies are their own brand products, says Kung.
While it is not unusual to see new brand names breaking into markets - like notebook PCs or digital audio players - cameras are different, says Jack Hsieh, vice president for finance at Premier Image Technology Corp, Taiwan's largest camera manufacturer.
Unlike most other consumer electronics products, "cameras have existed for over one hundred years," he says. And despite the jump from traditional optical models to digital cameras, consumers do not see cameras as new products, Hsieh explains. So brands established in the days of traditional chemical-based optical photography still have great value in the new market. This translates into continued success for older names like Canon and Nikon. Only a few new names have been able to break in, Hsieh says, typically companies like Sony and Hewlett-Packard, that have an existing strong brand identity and deep pockets.
There are additional factors holding back newcomers to a very competitive market, explains Kung. "Japanese companies offer a complete product line, from cheap compacts up to sophisticated DSLR [Digital Single Lens Reflex] models," he says, "but most Taiwanese companies can only compete at entry level. So if competition makes everyone's prices the same, those Taiwanese companies will probably get pushed out of the market.” Japanese manufacturers have "adopted a lower price strategy" during the past couple of years, Kung says, exacerbating this effect.
Although Taiwan's digital camera output has more than doubled in size over the past two years, this intense competition has actually reduced the percentage that is marketed under local brands, from close to 20 per cent to under five per cent, while the share devoted to other brand names has increased to 96 per cent.
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