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Ilse Jurriƫn : July 12th 2005 - 00:40 CET

Sanyo cuts digital camera production costs

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SanyoSanyo cuts digital camera production costs : Struggling Japanese electronics maker Sanyo Electric Co. Ltd. said on Monday it was making big strides in cutting digital camera production costs and was on track to hit its output target for this year. In an interview with Reuters, Morihiro Kubo, head of the company's camera division, also unveiled plans to double sales of its own-brand cameras by increasing output of its "Xacti C" series that can take both still pictures and video. Sanyo is one of the world's largest producers of digital cameras, but it supplies about 95 percent of its output to other companies such as Nikon Corp. and Olympus Corp. under original equipment manufacturer (OEM) agreements.
Sanyo cuts digital camera production costsCompetition is getting tougher
"There is no question that competition in the digital camera market is getting tougher and we have to strengthen our cost structure," Kubo said at the company's digital camera factory in Daito City in the western prefecture of Osaka. To that end, Kubo said Sanyo has been raising the ratio of overseas procurement, shifting production to countries where labor costs are lower and accelerating development to deliver products to its customers faster.

Digital camera business
While digital camera operations are still one of Sanyo's more profitable businesses, profit margins have come under pressure recently because of sliding prices, slowing market growth and troubles at some of its main customers. Olympus, for example, fell deep in the red last business year and recently announced it would cut 4,000 digital camera jobs.

Sanyo cuts production costs by 30%
Sanyo now makes over 90 percent of its cameras overseas at factories in Indonesia, China, South Korea and Vietnam. It plans to triple capacity in Vietnam to 3 million units by 2006/07, and ramp up to 5 million in 2007/08, Kubo said. "We are aiming to cut (production) costs by 30 percent with models coming out this fall compared with those launched in spring last year," Kubo said. "We have to cut costs by that much to keep up with price falls in the market."

Sanyo started selling digital cameras under their own brand in 1998
Kubo said he would like to raise sales of Sanyo's own branded cameras to 10 percent of its total in the future. The "Xacti C" series is the best way to achieve this target because it leverages the company's strong video technology, he said. "When we really started selling digital cameras under our own brand in 1998 we did so with models that could capture moving pictures," Kubo said. "That allowed us to put out a product that was different than what we were supplying to our OEM customers."

Sanyo - Future perspective
It plans to sell 300,000 of the combination video/still cameras in 2005/06, double the previous year's total and grabbing about 30 percent of the global market, which is expected to grow rapidly over the next several years. Kubo stood by the firm's target to produce 13 million units in the 2005/06 business year, up from 11 million in 2004/05. Some analysts have warned that Sanyo would fail to hit that target, first unveiled in April, due to weak market demand. "So far things are progressing in line with our plans." Sanyo does not give a breakdown for profit in its digital camera division and Kubo declined to comment on whether profit margins had improved or declined. But Goldman Sachs predicted in a recent report that the division would post an operating profit of 3.2 billion yen this business year, less than half the 7.0 billion yen of 2004/05. Sanyo said last week it would cut 14,000 employees, or about 15 percent of its global work force of 96,000, shutter domestic factories and halve debt in a sweeping restructuring designed to return the company to profitability. Kubo declined to comment on potential restructuring steps in the digital camera business.

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