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01-08-2010, 06:50 AM   #1
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Not too exciting (or surprising) financial blurb

Accelerating Factory Exodus Guts Japan Manufacturing Center - Bloomberg.com
Hoya Corp. kept its Pentax camera plant north of Tokyo open as rivals steadily moved factories overseas to cut costs, yet it couldn’t compete as the yen surged against the dollar and euro during the global recession.

The company paid suppliers and workers in yen, sold products in dollars and euros, and converted revenue into yen. Six straight quarterly losses prompted Hoya in June to close the last domestic Pentax plant, in Tochigi prefecture, as the yen rallied against the dollar.......................The Pentax factory peaked in the 1970s, with 1,500 workers making 35-millimeter, single-lens reflex cameras. Hoya’s Hamada moved all camera production offshore helping the company’s Pentax division to return to profit with operating income of 1.19 billion yen last quarter. Continuing to manufacture in Japan was “stupid,” according to Hamada.
“It was a waste,” he said.

Makes you wonder how Nikon and Canon can still do it relatively successfully.

01-08-2010, 06:59 AM   #2
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Volume, perhaps?
01-08-2010, 07:45 AM   #3
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QuoteOriginally posted by Kunzite Quote
Volume, perhaps?
If profit margins are bad even volume doesn't help completely.
01-08-2010, 08:02 AM   #4
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Yes, but it helps with fixed costs.

01-08-2010, 08:13 AM   #5
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There is always an advantage to have the production close to the engineers designing the product. Outsourcing tends to be bad for quality control and feedback back to the engineers.
01-10-2010, 05:47 AM   #6
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Moving production lines to other country may gives an advantage in pricing but that will only benefits the consumers if quality remains the same. I sincerely hope that if Hoya decided to shift its production operations to other cheaper countries, the quality will stay or remain consistent throughout the production.
01-10-2010, 06:26 AM   #7
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It's sad but no different from what manufacturers are doing in high-cost countries all over the world. It must be difficult maintaining quality control - but it least they're in the same hemisphere, unlike a lot of European or American companies with factories in China or wherever.
01-10-2010, 06:42 AM   #8
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A lot of outsourcing was made late here for some years ago, but we see more and more insourcing again. Reality has catched up with companies economy department I guess. It's not as simple as they saw in the excel sheets from the beginning

01-10-2010, 09:30 PM   #9
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Moving production facilities is not the same as outsourcing, and it is not a proven fact that shifting production to a lower cost country necessarily equates to inferior quality control. Businesses will seek to find cost savings and if that entails shifting production to a different location and there are significant cost savings to be made, they will do so. It all boils down to economics.

An example of outsourcing is the case of many mass market US and European bicycle brands. Many used to design in-house and go to Taiwan to manufacture but now, the Taiwanese companies are so good that the brands pretty much just select a particular frame design from an OEM catalogue and the Taiwan factories do everything. The US & European companies for the most part are just brands that concentrate on marketing and distribution. Whereas moving production facilities is setting up a factory in a lower cost country while still maintaining full control over production.

Last edited by creampuff; 01-10-2010 at 09:40 PM.
01-16-2010, 07:31 AM   #10
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Interesting info, thanks
01-16-2010, 08:54 AM   #11
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QuoteOriginally posted by jeffkrol Quote
Accelerating Factory Exodus Guts Japan Manufacturing Center - Bloomberg.com
The company paid suppliers and workers in yen, sold products in dollars and euros, and converted revenue into yen. Six straight quarterly losses prompted Hoya in June to close the last domestic Pentax plant, in Tochigi prefecture, as the yen rallied against the dollar

Makes you wonder how Nikon and Canon can still do it relatively successfully.
QuoteOriginally posted by Kunzite Quote
Volume, perhaps?
The fixed cost of a plant that has existed for more than 30 years has most likely been fully depreciated to zero, so P&E fixed cost is not a factor.

Building a new plant overseas requires capital. Capital must be amortized as a cost for each item manufactured in the new plant. So moving production overseas might actually INCREASE fixed cost. (Fixed cost for any production machinery transfers to the new plant if they move the machines).

What this tells us is that the VARIABLE costs of manufacturing in Japan (all the costs associated with paying Japanese workers, as well as any Japanese taxes that aren't paid in the other country) is so much higher that higher volume doesn't help, it actually hurts. If you lose money making 1000 lenses, you lose MORE money making 2000 lenses.

My guess is Canon and Nikon charge so much more for their lenses and cameras, that their profit margin, COUPLED WITH their TOTAL PRODUCT VOLUME is sufficient to allow them to keep some production in the home country.

Pentax must not have had enough total revenue from home production to make profit even after the lens price increases.

This is a very common problem for developed economies in North America, Europe and Japan. What will likely happen over time is that currency exchange ratios will slowly adjust to correct the overseas advantage and bring production back onshore. Of course, that will result in significant inflation (more Dollars/Euros,Yen required to purchase Yuan, Thai Baht, Phillipine Peso, VietnameseDong, etc).

If you think lens prices are high now, just wait five years.

And invest in something that hedges against inflation, denominated in some external currency.
01-17-2010, 12:23 AM   #12
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I thought a lot of Pentax was already in Vietnam. Of course I wonder if this means we are gonna have things like "post-Japan" FA31 Limited or something like that.
01-17-2010, 09:59 AM   #13
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Another financial review from dpreview notes that it is the high end dSLRS which make the most money-

dpreview.

Pentax presently does not operate in this segment, which can't help.

Justin.
01-17-2010, 03:38 PM   #14
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QuoteOriginally posted by monochrome Quote
The fixed cost of a plant that has existed for more than 30 years has most likely been fully depreciated to zero, so P&E fixed cost is not a factor.

Building a new plant overseas requires capital. Capital must be amortized as a cost for each item manufactured in the new plant. So moving production overseas might actually INCREASE fixed cost. (Fixed cost for any production machinery transfers to the new plant if they move the machines).

What this tells us is that the VARIABLE costs of manufacturing in Japan (all the costs associated with paying Japanese workers, as well as any Japanese taxes that aren't paid in the other country) is so much higher that higher volume doesn't help, it actually hurts. If you lose money making 1000 lenses, you lose MORE money making 2000 lenses.

My guess is Canon and Nikon charge so much more for their lenses and cameras, that their profit margin, COUPLED WITH their TOTAL PRODUCT VOLUME is sufficient to allow them to keep some production in the home country.

Pentax must not have had enough total revenue from home production to make profit even after the lens price increases.

This is a very common problem for developed economies in North America, Europe and Japan. What will likely happen over time is that currency exchange ratios will slowly adjust to correct the overseas advantage and bring production back onshore. Of course, that will result in significant inflation (more Dollars/Euros,Yen required to purchase Yuan, Thai Baht, Phillipine Peso, VietnameseDong, etc).

If you think lens prices are high now, just wait five years.

And invest in something that hedges against inflation, denominated in some external currency.
Interesting input, thanks.
Btw, what hedges against inflation ?




QuoteOriginally posted by justinr Quote
Another financial review from dpreview notes that it is the high end dSLRS which make the most money-

dpreview.

Pentax presently does not operate in this segment, which can't help.

Justin.
They are stating that what is selling, is the high resolution DSLRs :

"'Within the cameras segment, the high-resolution, competitively priced EOS Digital Rebel T1i (EOS 500D) and advanced-amateur model EOS 5D Mark II digital SLR cameras continued to enjoy robust sales during the quarter, contributing to growth in sales volume.' the company said: 'while demand for digital single-lens reflex (SLR) cameras displayed solid growth, demand for compact digital cameras remained sluggish amid continued price declines.'"


The bigger money is made in the mid- to high-end segment :

"There are really two types of consumer for DSLR, the entry level and the mid-to-high end buyer. The entry level sells for $300-$500 while the mid-range will cost anything from $1500-$6000 and profitability is very big. Canon and Nikon are in a much better position in that market. Even though Sony bought Konica Minolta, they are having difficulty improving market share. Their production costs and product releasing speed is still has room for improvement.'"

The Nikon and Canon gurus have lately stated, how the several thousand dollar cameras will become increasingly hard to sell. So with FF getting a lot cheaper, and high resolution possible still, sale in the top-end market will continue to shrink
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