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Japan's Nikon will become the next Kodak performance decline
In the 1970s, Kodak, a leading American imaging company, pioneered the world's first digital camera. However, this groundbreaking invention did not translate into long-term profitability for the company. By 2012, the century-old brand found itself struggling to keep up with the digital imaging revolution. While Nikon and Canon from Japan had become dominant players in the market, most photography enthusiasts had limited choices. Recently, even Nikon has faced operational challenges, raising concerns that it might follow in Kodak’s footsteps.
Nikon, which celebrated its 100th anniversary this year, has seen its performance decline, dampening the joy of the milestone. In 1917, the optical measuring instruments division of Tokyo Keiki Co., Ltd. merged with Iwaki Glass Co.'s mirror division to form Nippon Optical Co., Ltd. Later, the acquisition of Fujii Lens Manufacturing Co. laid the foundation for Nikon's future growth. At that time, the company hired eight German optical experts along with 200 local employees to produce telescopes, microscopes, and optical measuring instruments. By the 1930s, they began manufacturing photographic lenses and introduced the Nikkor brand.
After World War II ended in 1946, Nikon launched its first rangefinder body, which was sold in 1948 under the Nikon name. This camera quickly gained popularity among journalists who used it for on-site reporting. Its sharp lenses and lightweight, durable body helped build the company's reputation. Over the years, Nikon continued to release iconic lenses and bodies, establishing itself as a leader in the photographic equipment industry.
During the film era, Nikon produced legendary models like the F3 camera, and during the digital transition in the 1990s, it responded swiftly. In 1999, Nikon introduced a professional-grade digital SLR camera priced below $6,000, which significantly impacted the professional digital SLR market. It was not only more affordable than Kodak’s offerings but also more compact, attracting many news and advertising agencies to switch to digital cameras.
Driven by the success of professional cameras, consumer digital cameras also experienced rapid growth. Nikon’s entry-level digital camera lineup brought in substantial revenue through what some called a "wolf pack" strategy.
Despite its early successes, Nikon has struggled in recent years. The global camera market has shrunk dramatically, with supply dropping to 81 million units in 2016—less than half of the peak in 2010. The rise of smartphones has severely impacted the compact digital camera market, making it difficult for companies like Nikon to maintain their previous dominance.
Nikon’s brand value has also declined significantly. According to Interbrand, the value of the "Nikon" brand dropped 29% in one year to $1.5 billion, falling from 10th to 16th place. In 2016, it fell further to 21st, and in 2017, to 25th. Financially, Nikon has been in decline since 2007, when it reached its peak annual revenue of 75.4 billion yen. By 2015, earnings had dropped to 18.2 billion yen, and in the previous fiscal year, it reported a loss of 9 billion yen.
To address these challenges, Nikon has taken measures such as reducing staff by approximately 1,000 in Japan, or 10% of its domestic workforce. It has also announced plans to close a factory in China and reduce its product line. Last year, Nikon abandoned the introduction of three high-end digital cameras in the DL series, citing difficulties in maintaining profitability due to intense competition from lower-priced models.
The broader camera industry is also facing challenges. According to data from the Japan International Camera and Imaging Equipment Industry Association, camera and lens production and shipments have declined over the past few years, signaling a difficult period for the sector. Traditional image giants like Nikon are now forced to adapt, with many companies diversifying their operations.
Canon, for example, acquired Axis, a Swedish camera company, to enter the surveillance camera market. Sony, after selling its PC business, focused on gaming and entertainment, which contributed to a 22.1% year-on-year increase in sales in 2017.
In contrast, Nikon’s transformation has been slower. While it has expanded into semiconductors, microscopy, and medical diagnostics, these sectors have not yet become significant contributors to its overall performance. According to its 2017 annual report, the imaging department still accounted for over 50% of profits, while the precision manufacturing segment contributed more than 30% of revenue. However, the optical instruments and medical divisions underperformed in that year.
Another challenge for Nikon is its precision manufacturing division, which has also struggled in recent years. Once a leader in semiconductor manufacturing equipment, Nikon lost market share to Dutch company ASML and continues to face financial losses in this area.
Looking ahead, Nikon may continue to rely on its SLR business, leveraging its decades of experience in the camera market. However, this strategy may not be enough to reverse its decline. As it stands, Nikon appears increasingly similar to Kodak, which filed for bankruptcy in 2013. Both companies were pioneers in digital imaging, but neither managed to sustain long-term success in the evolving market.