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Earthquake continues to rock camera industry

There has been a temporary break in transmission of cameras from Japan due to the Kumamoto eathquakes in April. In an attempt to get a reality check on reported camera scarcity in the local market, PhotoCounter asked several suppliers and retailers how they were travelling.

Sony's Kumamoto image sensor plant was clise to te epicentre of the main 'quake. The Inage Resource website estimates up yo fourmonths production would have been lost.
Sony’s Kumamoto image sensor plant was close to the epicentre of the main ‘quake. The Image Resource website estimates up to four months production has been lost.

The devastating earthquakes knocked out Sony’s main manufacturing plant for image sensors used in cameras. Nikon, Pentax, Olympus and Leica are among the other camera companies which rely heavily on Sony sensor supply. The Kumamoto plant supplies around 40 percent of image sensors used in digital cameras.

Ted’s Cameras CEO Nic Peasley conceded that ‘supply has certainly been affected by the earthquake, but we purchased in advance in June and aside from some key models that no one can get, we are in good shape.

‘I expect stock to tighten over later August and early September, but the suppliers are all now more positive about the situation post September.’

A prominent NSW-based retailer confirmed that camera supply had been a challenge in recent months. ‘Oh yes. The tremors continue from that earthquake!’

He said that Sony was probably the most badly effected of the camera brands, given the ‘double whammy’ of Sony being ‘integral to the supply chain to many brands’ via its image sensor manufacture.

He said that camera makers were pulling back on volumes of digital compacts due to segment erosion anyway, and the sensor issue had exacerbated supply problems.

There was a real problem with travel zoom cameras in particular, he noted.

Industry buoyant – send more cameras!
Nikon general manager James Murray (below right) confirmed that supply in the compact segment would be slower to come back into balance, but DSLRs were less of a problem.

JamesMurray_2sm‘The earthquake has disrupted supply of sensors and other componentry from that [Kumamoto] area. This has impacted retailers over the last couple of months.’

He said that supply of DSLRs would improve from this month and be in good shape by September.

‘DSLRs will come back first with improved supply from this month. By Christmas we will be back to normal trade in compacts.’

He said there were no standouts when it came to models in short supply, but that availability of the new premium compact DL range was not yet confirmed for Christmas.

Nonetheless, James was bullish about trading conditions though 2016.

‘The market seems pretty buoyant at the moment,’ he said. ‘Levels of engagement with photography are at an all time high. From what I’m hearing from retailers, they are looking for a positive Christmas on the back of regular supply.

He said that Nikon would be investing heavily in promotional activities in the lead-up to Christmas to drive demand into specialist stores.

Olympus Imaging marketing manager, Kristie Galea, responded cautiously: ‘Whilst we were fortunate that no Olympus infrastructure was damaged during the natural event, we have experienced a disruption to our supply chain which has impacted production of our products.

‘As always we are working closely with our retail partners to manage supply to market and minimise impact to our consumers.’

Further questions – When does Olympus anticipate the period of disruption to supply coming to an end? Can retailers anticipate supply free of disruption in September or later? Are there any cameras in particular which are low on inventory? – went unanswered by time of publication.

This slide comes from a Sony Corporate Stretegy meeting on June 29. The boxed text bottom right says that Sony 'aims to reach full utilization on a wafer input basis around the end of August"
This slide comes from a Sony Corporate Strategy meeting on June 29. The boxed text bottom right says that Sony Kumamoto ‘aims to reach full utilization on a wafer input basis around the end of August.‘ (It shouldn’t have to be this hard to uncover the truth!)

Sony also responded to questions about lack of supply impacting retailers somewhat circumspectly:
Have retail customers of Sony Australia had any difficulty getting supplies of any Sony models over the past few months?
– This varies depending on model and region. We have sequentially resumed production of finished set products and some models may have faced supply shortage while some may not have. (Translation: Yes.)
What are the prospects for supply in the coming months?
– We are aiming to return to pre-earthquake inventory levels in time for the year-end sales seasons. (Note: the initial response from Sony, which was withdrawn prior to publication, was a lot more definite about that Christmas timeline.)
– There hasn’t been an update on the state of the Sony Kumamoto sensor fabrication plant since May, when it was stated that the plant would be back in action by the end of May. – Was this achieved? Is the plant now fully operational?
– The recovery at Kumamoto factory and restoration of production proceeded ahead of schedule by one month, and it is now fully operational. Testing operations and other back-end processes such as assembly had sequentially resumed from the middle of May. Wafer processing operations restarted sequentially beginning May 21. (The weasel word here is ‘sequentially’ – how long do these ‘sequences’ take once they are started?)

The effects of the Kumamoto earthquake – perhaps the biggest challenge to photo retailing in 2016 – have been downplayed across the board. Sony’s sunny statements about sequential resumption of production and fully operational plants mask the fact that the Kumamoto plant appears to have been out of action for most of the second quarter and beyond, and caused a billion dollar hit to earnings to Sony alone.

Olympus Imaging sales fell 25.5 percent for the second quarter compared to Q2 2015, with it’s M43 cameras down 23 percent.

Nikon – Sony’s largest customer for image sensors – has had an even worse quarter, with net sales down by 31 percent, including interchangeable-lens camera unit sales down by 32 percent and compacts down around 45 percent.

Here’s the respected US Image Resource website’s own reality check on Sony’s statements:

The complexity of the semiconductor fabrication process means it takes a long time from raw wafer to finished sensor..About three months. So after the production resumed on May 21, it would require three months, give or take, for the first sensors to start coming out the other end. In other words, the first chips since the quake will only be starting to ship sometime about now.

The industry didn’t lose just 36 days or so, it lost more than four months of production. A third or so of an entire year’s output.

Sony has made no comment on the internal state of the plant, but it’s hard to imagine that a lot of delicate equipment wasn’t badly damaged, at least some of it to the point of needing to be replaced or significantly overhauled. But these aren’t machines you can just run down to the corner superstore to pick up another one. Many will be build-to-order items, with long lead times.

So as an industry, we’re not out of the woods yet. Even if sensors are about to start coming off the line again, they probably won’t be doing so as quickly as before the quake.

…Short on cameras? There’s never been a better time to focus on lens sales, argues John Swainston. 

One Comment

  1. David Burlew David Burlew August 19, 2016

    Whilst camera hardware supply may be down, the macroeconomic doctrine should apply. Whilst supply is poor, the margins should increase. In any case, it’s been a great time to put some energy into promoting equipment and accessories. We’ve seen a substantial lift in demand for accessories since the earthquake.
    David Burlew

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