Use the U.S.-China Trade War as a Curious Currency for Canon's Revival

2020.02.02 06:01

The January 30 Nihon Keizai Shimbun's electronic edition article, "Canon, undergoing a 'second founding,' shrinks digital cameras, net income down 51% in previous fiscal year," includes a chart comparing operating income by business segment, excluding corporate eliminations, for FY12/07 and FY12/09.

The Nihon Keizai Shimbun, in a discernment move on the part of CEO Fujio Mitarai, who has served as chairman of Nippon Keidanren, wrote, "We were not inept," and "The speed at which the market is changing is greater than expected. However, it is clear that Mr. Fujio Mitarai definitely lacks the qualities necessary for a manager in the age of VUCA.

Although this article makes such a cavalier statement as "It may take some time for the 'four arrows' to fully take root in the post-digital camera era," I believe that Canon is facing an existential crisis.

In my article of October 13 last year, I expressed my views on drones. At the time of writing this article, I thought that Canon would not stand a chance if it entered the drone market now, but since then, the situation has changed drastically and I have changed my view. I would like to explain.

Last December 9, the Nihon Keizai Shimbun's electronic edition article, "Japan Coast Guard to 'Eliminate' Chinese Drones, Concerned about Information Security," reported that the Coast Guard will switch dozens of drones in use to other models and eliminate Chinese products from government procurement, following Huawei products.

There are a great many "China watchers" in the world. The reason for this is not because of the size of China's economy or population. It is because the decision-making process of the Chinese government is shrouded in secrecy, unlike in democracies.

And that Chinese companies are not really "private enterprises" but have a "special relationship" with the government can be easily seen by researching the Sany Heavy Industry Co., Ltd. and others that were in the news at the time of the Great East Japan Earthquake. Although Chinese companies are disguised as private enterprises, they are in fact one with the government.

In September 2016, Canon Marketing Japan announced that it would invest 100 million yen in industrial drone manufacturer ProDrone (headquartered in Nagoya, Japan) in response to a third-party allocation of new shares. Prodrone's products are currently all expensive industrial drones. China's DJI, the largest drone manufacturer, offers a full lineup, from low-priced entry-level models to more expensive models. Prodrone has a policy of not daring to enter the consumer model market, a decision that is correct given Prodrone's current corporate size.

It would not be surprising to see a move to exclude Chinese products from consumer drones and smartphones in the future, although it is not clear whether this will be due to pressure from the U.S. government or the initiative of the Japanese government. Even without government regulation, users may voluntarily choose "China-free" products.

Canon has a full lineup of products in the camera market, from low-priced models to flagship models for professional use. Many of the management resources needed to manufacture drones already exist within the company. Expensive industrial drones can be left to professional drones, but for entry-level models that can be expected to be produced in volume to mid- to high-end models priced around 1 million yen, it would be commercially viable for the company to manufacture them in-house.

In order for Canon to survive, it needs a manager who is suitable for the VUCA era, and it is essential that Mr. Fujio Mitarai step down. I am also a lecturer at a study group for investors. There are limits to what I can write in Agora due to space limitations. Please feel free to contact me via this form regarding requests to speak at workshops for investors.

first appearance : AGORA