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It''s time to buy a new digital camera

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CIOL Bureau
Updated On
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By Aiko Wakao

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TOKYO - Thirty-year-old nurse Rie Wakaume is a camera maker's dream.

About to get married in Italy, Wakaume is ready to splurge on the latest trend in photography -- digital SLR cameras -- even though she has a perfectly good camera.

She highlights not only the readiness of shutterbugs to snap up professional-level technology now that prices have come down, but also a potentially lucrative change in the camera business: shorter replacement cycles.

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"Digital SLRs are now cheaper, smaller and take better pictures," Wakaume said after visiting her local electronics store.

Digital SLRs -- single-lens reflex cameras that enable consumers to see images exactly as they will be captured -- are all the rage. And Wakaume says prices are about half of what she remembered two years ago.

Wakaume is one of several million consumers who may switch to the most profitable models in the $34 billion digital camera market. Previously, only professionals and serious hobbyists bought digital SLRs.

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"Price declines are accelerating, especially as digital SLRs aimed at women enter the market," said Christopher Chute, an analyst at researcher IDC. "So, no end in sight for price drops."

Those price declines can be good news for top makers Canon Inc., Sony Corp., Eastman Kodak Co., Olympus Corp. and Nikon Corp. Mirroring earlier trends in mobile phones, they herald faster upgrades.

"The replacement cycle is becoming shorter," said Ryosuke Katsura, a Mizuho Securities analyst who had previously expected the life cycle of digital cameras would be roughly half the eight years for film models.

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Thanks to the revived demand, global shipments may jump 24 percent to 100.5 million units in 2006, Mizuho's Katsura estimated. But he expects growth in 2007 to slow to 11 percent, followed by a 13 percent rise in 2008.

EMERGING DEMAND

Shipments in the recent months have exceeded market expectations, and also prompted Canon, Olympus and Pentax Corp. to raise shipment goals.

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One reason is rising demand in emerging markets.

"The industry is becoming mature, and that's why we have to expand our sales efforts in China and Russia, where we're seeing growth," Tomonori Iwashita, the head of Canon's camera unit, said in an interview with Reuters this month.

By 2009, some 22 percent of global digital camera shipments will be to the region it calls the rest of the world (ROW), which includes Brazil, Russia and India, according to IDC. The Asia-Pacific region, including China, will make up 26 percent.

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"Consumers in developing countries are spending almost as much money on digital SLRs and interchangeable lenses as consumers in Japan," Scott Foster, an analyst from HSBC Securities, said in a report this month.

Not all makers are profiting: Shipments at Eastman Kodak fell 7 percent in the recent quarter. Nidec Copal Corp., the top maker of digital camera shutters, is seeing declines in orders after a strong summer due to potential overproduction by makers.

Damian Thong, an analyst from Macquarie Research, is already warning that shipments may be building up to a correction, citing signs of slowdown along the supply chain.

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Prices for digital SLRs are expected to dip as low as $500 by the end of the year, as Canon and Nikon compete against new players such as Sony.

"We have to make new products that can attract young people who are used to taking photos with cell phones," Nikon President Michio Kariya told Reuters in an interview on Wednesday.

Entry-level SLRs, which make beginners feel like pros, are also becoming lighter with models like the one from Olympus, weighing as much as a canned soft drink.

Users can change lenses to focus on faraway details, capture action or shoot broad landscapes. They also feature bigger displays so users can check their shots right away.

Sony is entering the SLR market this year with its strong brand in TVs and games, aiming for a 10 percent share in digital SLRs, or about 500,000 units in shipments.

Last week, Nikon also unveiled a new SLR, the D40, for the year-end season with an expected body price below 60,000 yen ($500), about 20,000 yen less than top maker Canon's EOS Kiss Digital X launched in September.

"Canon and Nikon will remain as leaders in the space given they make key components in-house," said John Yang, an analyst at Standard & Poor's in Tokyo. "If you can't internalise production of killer parts, especially the lens, you can't really win."

Canon and Nikon together had more than 80 percent of the global digital SLR market last year, according to IDC.

"There's no way my compact cameras could truly capture the beautiful scenery of Florence the way a single lens reflex does," she said.