[biz-engineer]

There no reason to think 5KMark IV or Pentax K1 to have very different cost in R&D. If I was to guess, I would suspect K1 to cost more in R&D because it is the first FF body of Pentax for years.

There is at least one reason why the 5DIV R&D costs more than a K1 is NRE for the sensor and its qualification (I am 100% sure of this). Basically, it costs in the range of 1 to 5 million dollar to develop a new sensor including prototype fabrication, reliability testing and production tooling. For Canon, this money isn't shared with other camera brands because Canon have their own dedicated sensor process and production line. Canon have to sell a lot of 5DIV to pay for the sensor development itself. Ricoh imaging used one of the best sensor from Sony , with sensor prototyping already paid back after 4 or 5 years of production from Sony and Nikon. Therefore, the break even sales (minimum quantity sold to make a profit) is much lower for the K1 then it was for the D800E and Sony A7R and also lower than the total R&D expenses of the 5DIV.

[monochrome]

Therefore, the break even sales (minimum quantity sold to make a profit) is much lower for the K1 then it was for the D800E and Sony A7R and also lower than the total R&D expenses of the 5DIV.

Pentax business model in one sentence.

[mecrox]

There is at least one reason why the 5DIV R&D costs more than a K1 is NRE for the sensor and its qualification (I am 100% sure of this). Basically, it costs in the range of 1 to 5 million dollar to develop a new sensor including prototype fabrication, reliability testing and production tooling. For Canon, this money isn't shared with other camera brands because Canon have their own dedicated sensor process and production line. Canon have to sell a lot of 5DIV to pay for the sensor development itself. Ricoh imaging used one of the best sensor from Sony , with sensor prototyping already paid back after 4 or 5 years of production from Sony and Nikon. Therefore, the break even sales (minimum quantity sold to make a profit) is much lower for the K1 then it was for the D800E and Sony A7R and also lower than the total R&D expenses of the 5DIV.

OTOH, the cost of the tech in the sensor can be spread across several models of camera, into video cameras and maybe into sensors for other things like robot machines or vehicles. Pentax, OTOH, have to buy in something which includes a mark-up for profit and get no spin-offs. So it is swings and roundabouts. I suppose it's possible that doing their own sensors is an ace for Canon long term, as sensors get put into almost everything so a sensor division might be a valuable asset for them?? Or not?? Also, Nikon will be buying in huge bulk compared to Pentax. I'd guess the real big savings for Pentax might come in general overheads - the cost of running the business without all that marketing, offices and plant, etc.

[RonHendriks1966]

Pentax business model in one sentence.

Make Pentax great again!


??

[Nicolas06]

There is at least one reason why the 5DIV R&D costs more than a K1 is NRE for the sensor and its qualification (I am 100% sure of this). Basically, it costs in the range of 1 to 5 million dollar to develop a new sensor including prototype fabrication, reliability testing and production tooling. For Canon, this money isn't shared with other camera brands because Canon have their own dedicated sensor process and production line. Canon have to sell a lot of 5DIV to pay for the sensor development itself. Ricoh imaging used one of the best sensor from Sony , with sensor prototyping already paid back after 4 or 5 years of production from Sony and Nikon. Therefore, the break even sales (minimum quantity sold to make a profit) is much lower for the K1 then it was for the D800E and Sony A7R and also lower than the total R&D expenses of the 5DIV.

The same sensor was used in APSC format before, basically this mostly about yield. Not sure they have an issue about it as they have been making FF sensor for years....

Beside, 5millions $ is nothing. 1500 unit at current price, 2500 unit if they selected instead $2000 for the sale price. And imagine if the cost is only 1 or 2 million in you range because they reuse existing tech...

They likely plan for at least a million units sold for the life of the body, likely more. That's a few billions in sales.

[Rondec]

The same sensor was used in APSC format before, basically this mostly about yield. Not sure they have an issue about it as they have been making FF sensor for years....

Beside, 5millions $ is nothing. 1500 unit at current price, 2500 unit if they selected instead $2000 for the sale price. And imagine if the cost is only 1 or 2 million in you range because they reuse existing tech...

They likely plan for at least a million units sold for the life of the body, likely more. That's a few billions in sales.

I very much doubt they will sell a million 5D MK IV cameras -- that seems more likely for entry level cameras, or even a 6D. Seems doubtful and if the life span of the camera is long enough, the price will fall toward the end of the cycle when the R and D costs are paid off.

I suppose there are two points to be made. First of all, Canon charges this much for the camera because they can. That is to say they will sell enough cameras at this price point where they will make a profit and truthfully, if you can make the same profit selling 10,000 cameras by pricing them higher than you would selling 20,000 priced lower, why wouldn't you? The second thing is that Canon has a 6D for entry level to full frame. This camera isn't that and therefore isn't intended to sell as many units and is priced higher to separate it from the lower end cameras.

Few things are priced in the marketplace purely based on cost to produce them and distribute them and camera bodies are no different. Low end bodies actually have very little profit per unit because of how cut throat that end of the market is, while upper end bodies have more profit per unit.

[beholder3]

Just a little perspective:
If you throw all DSLRs and lenses together struggling Nikon makes a meagre 35 EUR operating profit per unit sold according to their newest forecast.
If they were selling loads of D810s and if they were making lots of profit on them then that would mean their share of sales would be negligible.

[biz-engineer]

OTOH, the cost of the tech in the sensor can be spread across several models of camera,

No , the 30Mp sensor is only in one camera model: 5DIV.

---------- Post added 13-11-16 at 09:59 ----------

I suppose it's possible that doing their own sensors is an ace for Canon long term, as sensors get put into almost everything so a sensor division might be a valuable asset for them?? Or not??

Yes, building their own fab line was a decision of Canon when Sony wasn't so good. But the market situation changed, Sony semiconductor image sensor group grew and acquired the activities of other image sensor companies. As of today, Canon likely have no advantage at all making their own sensor, especially Sony and others outperform canon in term of image sensor technology.

If you look at semiconductor industry, in 15 years, it moved from vertically integrated to horizontal. TSMC (Taiwan Semiconductor Manufacturing Co. ) and other wafer foundry players used to be minority players and there were used to dampen market variations. But beyond a certain critical point of economics, the fabless model became more cost effective, and a number of fabless semiconductor companies rose to the top of the ranking. For example: Mediatek, Qualcomm do not own their fab, and they rose faster than companies vertically integrated (owning their own fabs). In 2016, the NRE for developing new fab line is so high than only 2 companies in the world can afford it: Intel because they have sufficient market share and TSMC because the tech investment is shared across the industry (many players covering many market segments). Qualcomm (a fabless company) recently acquired NXP semiconductors (who have their own fabs): https://www.qualcomm.com/news/releases/2016/10/27/qualcomm-acquire-nxp

[mecrox]

No , the 30Mp sensor is only in one camera model: 5DIV.

---------- Post added 13-11-16 at 09:59 ----------


Yes, building their own fab line was a decision of Canon when Sony wasn't so good. But the market situation changed, Sony semiconductor image sensor group grew and acquired the activities of other image sensor companies. As of today, Canon likely have no advantage at all making their own sensor, especially Sony and others outperform canon in term of image sensor technology.

If you look at semiconductor industry, in 15 years, it moved from vertically integrated to horizontal. TSMC (Taiwan Semiconductor Manufacturing Co. ) and other wafer foundry players used to be minority players and there were used to dampen market variations. But beyond a certain critical point of economics, the fabless model became more cost effective, and a number of fabless semiconductor companies rose to the top of the ranking. For example: Mediatek, Qualcomm do not own their fab, and they rose faster than companies vertically integrated (owning their own fabs). In 2016, the NRE for developing new fab line is so high than only 2 companies in the world can afford it: Intel because they have sufficient market share and TSMC because the tech investment is shared across the industry (many players covering many market segments). Qualcomm (a fabless company) recently acquired NXP semiconductors (who have their own fabs): Qualcomm to Acquire NXP | Qualcomm

Very interesting, thank you

[biz-engineer]

You can anticipate that Canon camera live a dangerous life since they can only make money beyond a certain market share or absolute revenue due to the fix cost of running sensor fab lines. As soon as a sensor fab line isn't fully loaded , the unit cost of sensor increases because the cost of running a fab line is constant. If Canon would lose some market share (from 40% to 20%) or if the market size for DSLR would shrink (that is the case, actually) or because of some disruptive camera tech coming to market , they'd have to divest their fabs and follow the model of Nikon, Pentax and others, which would further lower the cost of open market sensors and would give even more advantage to camera companies not owning their sensor fabs. Furthermore, the initial cost of new fab lines increasing, the economical model of Canon may not be an advantage anymore in the future. Today, most image sensors employ a 0.13um CMOS base process modified for image sensors (300mm wafers of Sony semiconductors). Canon likely still use 200mm wafers because for 300mm they'd have to replace all of their equipments...Sony semiconductors likely have a unit cost advantage over Canon. In the future, we can anticipate that sensors may move to 90nm or 65nm, if so, Canon would lose the ball and will buy sensor tech from Sony semiconductors. Since Canon is a minority player in semiconductor tech, they'll likely be outpaced by semiconductor specialists (that is already the case today, Canon sensor tech is old...).

---------- Post added 13-11-16 at 10:20 ----------

Beside, 5millions $ is nothing. 1500 unit at current price, 2500 unit if they selected instead $2000 for the sale price.

Selling price and net profit are two different things. You can't divide NRE buy selling price to get breakeven sales.

---------- Post added 13-11-16 at 10:23 ----------

If Canon has 40% market share, a strategic alliance between all other players would beat Canon down. Industry is a game, there are strategies and counter strategies. I believe, the reason why Canon is still dominant is failure from Fuji, Pentax and al. to ally.

---------- Post added 13-11-16 at 10:32 ----------

Look at semicon. ranking. here. Semiconductor sales leaders by year - Wikipedia. Mediatek and Qualcomm both do not own their fabs. In year 2000 Mediatek and Qualcomm did not even exist in the top 15. In 2016, Qualcomm displaced Texas Instruments. And Mediatek rose to 10th position.

For Nicolas, you know that Texas Instrument (vertically integrated) who was supplying digital processors to the mobile industry , closed activities and sold its plant in Villeneuve Loubet (France), part of it was sold to Intel.... Qualcomm having no fab quicked them out of the business. Do you understand now?

[Nicolas06]

I very much doubt they will sell a million 5D MK IV cameras -- that seems more likely for entry level cameras, or even a 6D. Seems doubtful and if the life span of the camera is long enough, the price will fall toward the end of the cycle when the R and D costs are paid off.

The market of ILC is about 12-13 millions unit a year. It can continue to shrink of course. Canon itself is about 4 millions DSLR (more than 50% of DSLR part). Let's take 3 millions to be on the conservative side and counting the market will continue to skrink.

5DMark III is still sold today. It is 4.5 years old. It is the most popular Canon camera on flickr. There twice the number of uploading users daily for 5DMark III than D7100, 50% more than a T3i, 3 time more than D810. Pentax is many time behind. We can expect the total DSLR volume for Canon to be about 10-20 millions unit total for the next 5 years, so 5DMark IV making 1 millions is about it taking 5-10% of the sales. Couting this is their most popular line by far, to me it look quite feasible.

[Nicolas06]

For Nicolas, you know that Texas Instrument (vertically integrated) who was supplying digital processors to the mobile industry , closed activities and sold its plant in Villeneuve Loubet (France), part of it was sold to Intel.... Qualcomm having no fab quicked them out of the business. Do you understand now?

The cost you provided for making a sensor unit is valid when you are not the owner of the factory. If you are the owner. You have high cost whatever you do. It being a low cost APSC or high end DSLR, The effective number of unit you make per wafer is what count, including errors. In the end, Canon may get that an APSC sensor cost them $50 and $200 for an FF sensor, this still doesn't really justify the price of what the consumer pay for a 5Dmark IV.

But owning their own fab as wordwide leader in camera industry mean they are free to innovate the way they want. Not sure they would have the dual pixel technology they have today if they just asked Sony.

Sony make likely many more sensor, all size included than Canon, but for big sensor like FF, Canon is likely making more. Not sure then that Canon master the technology for yield and cost any less than Sony.

[beholder3]

The market of ILC is about 12-13 millions unit a year. It can continue to shrink of course.

Not. It was less than 10 millions in 2015 already. Current prognosis is anywhere between 7 and 8 million.

[biz-engineer]

The cost you provided for making a sensor unit is valid when you are not the owner of the factory.

The NRE for a new sensor is several million dollars and the NRE for a new fab line counts in several hundred of million dollars. The price of a new fab facility between 1 and 2 billion dollars. So, if a company buy a cmos sensor off the shelf, as Ricoh imaging did, the development cost is order of magnitude lower than others. If Ricoh imaging was doing development with the cost structure of Canon, they would have gone bankrupt for a long time already. Ricoh imaging and Nikon have much less fixed costs than Canon , and if the camera market size shrinks, Canon is going to be hit much harder than every other brand, but we don't know the truth about Canon because of all the sunk costs that are spread across the Canon group.

I never said that Canon sell less full frame camera than Pentax. I said, since Ricoh imaging cost model is different from Canon, it is not sure who is the most profitable. Obviously, Canon sells many more camera than Ricoh imaging does. But what does matter to investors is the return on equity and not the revenue per say. If I invest my money into enterprise equity, between equity of a company making $10M revenue with +10% EBIT and a company making 1Billion revenue and -10% EBIT, I chose to invest my money into the assets of the smaller company. And if I know that Canon sensor tech is 10 years old and they are going to have to bite the bullet to upgrade to a new fab line to compete with Sony sensors, I won't put my money into Canon camera stocks.

[RonHendriks1966]

You probably missed that canon is prepraring to sell it's sensors to other company's. They want to make money and lower the cost for themselves.

http://petapixel.com/2016/09/01/canon-sell-cmos-sensors-companies-first-time/

The market for ilc looks like this year to be between 10 and 11 million units. This is for milc and dslr. Canon has currently a marketshare of 49 %. So they sell between 5 and 5,5 million units dslr and m-series together.

I do think they sold more then 1 million units 5D Mark III. I don't think that the 5D Mark IV will reach that high in the end.