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Nikon Increases Earnings But Loses Ground

Nikon recently posted its first quarter financial report which shows improved sales but still leaves many questions unanswered about its post-COVID recovery. Is it making or — indeed — losing ground to its competitors?

Earlier this year I reported on Nikon's generally weak progress as a business since 2015 with financial results for 2020-2021 (reported by Nikon as 2021) — like many manufacturers — having taken a significant hit from the COVID-hit global recession. The Imaging Division is the principal source of their financial problems having significantly restructured which led to inevitable, and large, write-off costs. Once the shining beacon of Nikon's progress, year-on-year it is generating a smaller proportion of total revenue, now down to 30%. That is still a significant part of their business though and the slow in-roads into the mirrorless market (compared to Canon and Sony) isn't improving that outlook. The first quarter of their financial year (April-June) is therefore important given the recent recovery and upturn in the global economy.

The good news is that income is up at Nikon, although this is to be expected as it is occurring across the whole sector. Revenue came in at ¥132 billion, with an operating profit of ¥20 billion. This has led to a revision in total revenue for the year to ¥520 billion and ¥27 billion in operating profit. Remember that last year's revenue was ¥451 billion, dropping from ¥591 billion the year before that. This shows that Nikon expects to be closing in on pre-COVID parity, which is perhaps a good sign as to how the market is recovering. In terms of market segments, only Industrial Metrology ran at a loss but this only represented 5% of revenue and the loss was small. Precision Equipment remains the star of the business with a 164% increase in revenue at ¥52 billion and is forecast to be the biggest segment at 40%. Imaging also did very well with a 99% increase in revenue and forecast to account for 32% of revenue; that latter is only slightly up on last year. More importantly, it generated a profit.

Z-System Camera Shipments

This is all positive news for the Imaging Division, however, the proof remains in the sales pudding and this is where it fell apart for Nikon last year. Camera ILC shipments were at a new low of 5.7 million units, made up of 3.3 million mirrorless and 2.4 million DSLR units. Nikon reports shipping 840,000 ILCs but, disingenuously, doesn't itemize the split between mirrorless and DSLR. The best we can do is compare their ILC forecasts with last year's and infer the split between the two segments. The first thing to note is that they expect the overall market to grow to 9.1 million units; last year the market was 8.9 million units and CIPA shipments are currently 22% up although the second half of 2020 saw the shipment gap to the previous year narrow. So while sales won't be 22% higher, Nikon's expectation is perhaps an underestimate (as it was last year). Of the 9.1 million units, 5.8 million are estimated to be ILCs; again, given that 5.9 million shipped last year this is likely an underestimate (but let's stick with it). And this is where the biggest warning for the Imaging Division is buried; even with an increasing ILC market, Nikon is expecting to ship fewer units, reducing from 840,000 last year to 750,000 this year.

Ponder that figure: 750,000 cameras shipped. Then look across at Canon whose Imaging Division has a revenue forecast of ¥431 billion on the back of shipping a forecast of 3 million ILCs.

This reduction in units shipped is likely threefold. Firstly, there will undoubtedly be a continued contraction of the DSLR market in which Nikon does particularly well with a 2020 market share of around 30%. Last year was the first time mirrorless (55%) units out-shipped DSLRs (45%) and that trend looks likely to continue as both Nikon and Canon reduce production in favor of mirrorless and consumers focus their purchasing on new systems. As a best-case scenario, the reduction in shipments Nikon is forecasting could be based upon maintaining current mirrorless numbers (around 250,000), with the losses from DSLRs. Either way, this is a worrying situation as it demonstrates that Nikon is not shipping more units at a time when Sony and, particularly, Canon are thriving.

Secondly, the only new model on the market this year is in the form of the Z fc and while a great featured and looking camera, it won't single handedly reverse Nikon's sales fortunes. There is the mooted Z 9 which has been seen in the wild at the Tokyo Olympics but it won't contribute to sales in 2021. Thirdly, we also know there are supply problems which are slowing the delivery of some products.

Nikon's Magical Turn Around?

For whatever reason, Nikon appears to have a problem in persuading people to buy into its Z System. With both Nikon and Canon playing catch-up to Sony, they are taking alternate strategies to fill out their ranges of cameras and lenses. In one sense, Canon has an easier time of this because it is only developing a full frame system, leaving the APC ground to their ESO M range. The EOS M50 Mark II shows that there is still life left in the system, but given the second tier standing in comparison to the EOS R range, it's hard to see big spending amateurs being drawn to it, let alone wildlife and sports photographers who want that extra reach that APS-C offers. Nikon has played to this market with the well-regarded Z50 and Z fc but it is lacking a filled-out lens range to support it.

On one level, the lack of sales we are seeing isn't a problem. As long as the Imaging Division is making a profit then it is paying its way, in much the same way that we see at Fuji. However, on another level there is concern that Nikon has ceded control of the market to Canon and Sony, potentially relegating itself to a Pentax-esque bit player. It's joining the party, but only doing a little jig in the corner of the dance floor while watching everyone else.

Will its strategy result in a slow start (which we are already seeing), but attracting users with time? The next year will give us more information on both the camera and lens roadmap along with those critical sales.

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17 Comments

Ryan Cooper's picture

I think, for me, as a Nikon shooter the biggest problem Nikon is facing is that it is a really tough sell getting me to jump into Nikon Z. (I am still on Nikon F).

Nikon Z seems like a perfectly good line but it doesn't appear to have anything whatsoever setting it apart to justify the downsides. They claim the larger lens mount design offers optical opportunities that their competitors lack but in reality that hasn't actually come to fruition in any meaningful way. (other than an absurdly expensive manual 50)

Add in the fact that Nikon, as a business, seems to be on awfully wobbly ground which makes me very apprehensive about investing in that platform. If/when I decide to go mirrorless, what does sticking to Nikon really benefit me over switching brands? I can just as easily adapt my existing glass to Sony as I can to Nikon Z. It isn't measurably better. I don't save money by sticking to Nikon. I don't have much brand loyalty.

I like Nikon. I think Nikon Z is a very solid system and can produce world-class images. I just can't justify investing in it. I'm not the only one.

Jaron Horst's picture

I'm in the same boat and completely agree!

Robert Hoernig's picture

It’s not just the 50mm. I own several Z lenses and they are the best glas I ever had. The 24-70 2.8 Z delivers prime lens quality throughout the entire range!

Shooting on a D850 and a D4 I decided to go mirrorless and went for a Sony a7rIII beside my Nikon DSLRs. It didn’t even took a year to regret that decision.
Maybe u can get used to Sony’s user interface, but the e-mount was designed for crop sensors and you can definitely see that in the image quality!

Besides, I had internal reflections of the shutter mechanism, using wide apertures in bright sunlight, I had a square pattern in images, using flash to balance sunlight. That pattern was in the shadows only, and could not be removed in post.

Seriously! Coming from Nikon’s DSLR I was so disappointed by Sony’s mirrorless performance, that I sold all my Sony gear and gave the Z a try.
Regarding user experience and image quality it’s far superior. There is a tiny lag in AF compared to Sony. But that’s something you can handle as a photographer and future bodies will improve that.

If you’re serious about going mirrorless, then try out systems by yourself. Rent them and decide by yourself.
I trusted reviews and influencers that talked me into Sony and for me it was nothing but an expensive mistake…

And in case u wonder, I only used native glass on both systems.

Hans J. Nielsen's picture

[They claim the larger lens mount design offers optical opportunities that their competitors]

No they never said that. They said the larger mount would make the engineers able to produce lenses they could not make with a smaller mount (read F-mount).

And as someone whom has been in both lines of lenses, I can say they are right.

Ask yourself this question. Will swapping system make me a better photographer and make my photos better, then by all means swap. If not, then why bother with the question?

Dave Haynie's picture

Sure, Nikon is talking about the Z vs F mount specifically. They can't exactly imply a huge advantage over Canon, being 1mm wider than EF and RF. On the other hand, the Sony E-Mount is only 2.1mm wider than the F-Mount. I think they throw shade at Sony plenty in the way they sold the Z-Mount characteristics.

Max Smith's picture

Unless you are specifically using fairly old screw drive lenses, then sticking with Nikon should, at the very least, save money in your initial investment into the system. Despite what you may have heard, the FTZ does not downgrade the performance of any F mount lenses, and will definitely allow you to utilize them much better than trying to adapt your current glass to an entirely different brand.

Nikon never claimed the new mount would allow them to be able to produce things their competitors couldn’t, but they did claim that it opened up new possibilities of things they couldn’t do on F mount. Other than the S line of lenses all being optically fantastic, some new things that are coming out are the Noct (which most don’t care about), the best quality 50mm f1.2 lens Nikon has ever produced, and a unique-to-Nikon-only 14-30 f4.

Deleted Account's picture

If you are going to be your normal condescending self, at least know what you are talking about.

The D3200 is a perfectly capable instrument, but it will not meter with AI and AI-s lenses.

Stuart C's picture

Or allow use of auto focus on those lenses with screw mechanisms.

Steve Chandler's picture

Nikon for the most part has been in the top 3 for many years and still is. Pray they don’t go away because competition brings innovation. But, all this doom and gloom about Nikon scares away new buyers and existing buyers to upgrade. It’s self-fulfilling, and those who propagate it are to blame. Sony, Canon and Nikon have all done poorly because of smart phones. Blame the smart phone industry, social media, and influencers, not just COVID. I can’t stand wasting time on who of the top 3 is doing the worse, what is the point? Give accolades to the successes and suggestions on improvements.

Sony and Canon currently have better eye tracking, but Nikon will catch up. For me, it doesn’t affect my portrait shoots unless the model running in circles. Nikon’s lenses are outstanding, equal to or better than most. Nikon’s sensors rate better than Canon, and same as Sony who makes them. Doubt it? Well look at Dxomark.com and see the sensor reviews and lens reviews. Better yet, look at ephotozine.com review of Nikon lenses specifically the MTF charts for the different apertures to see that Nikon lenses are optically outstanding. The Nikon Z system is outstanding and I have been impressed with the results.

Not enough Nikon S lenses? Have you compared their lineup to Canon? They have everything I need except for an S line super telephone. Their 14-24mm f2.8, 35mm, and 85mm cover the bulk of my photo-shoots, excellent IQ and affordable. True, they only produced a 50mm 1.2 and a 58mm 0.95, but the marginal improvement in f stop rarely improves sharpness for the drastic increase in cost. For wildlife I still use for super telephoto an F mount with an FTZ. Yes, Canon did recently release a 400mm and 600mm for $18,0000 and $20,000 that may have used their old optics. Somehow thinking Nikon will do better and not just permanently add on an FTZ onto their old 400 and 600.

As photographers we need to support what’s left of the equipment manufacturers and not doom and gloom them into nonexistence to our own detriment. I hope they all thrive.

Jim Tincher's picture

Pretty accurate... people need to stop listening to the doom and gloom headlines. Sad to see so many (Sony lovers) want to see a company fail. Nikon isn't going to fail or go out of business. Canon and Sony are significantly larger companies (because of other products) so they were able to absorb their downturn easier than Nikon. All across the board actual camera sales are down as smartphones are satisfying the needs of a larger segment than before.

For those in the F-mount I will tell you that my Z images are consistently sharper than anything my D750 or D850 produces.... so much so I don't use them anymore.

Doug Blake's picture

I prefer the handling and files of Nikon cameras. Just a personal response. I am not worried about the longevity of Nikon as long as they keep producing quality equipment.
I am reminded of several decades in the art world of predictions of the demise of painting. Painting is still alive and well in spite of the attacks of non-painters trying to corner the market.
I purchased a Z fc and love the camera. It is exactly what I hoped for and the files are great.
I wouldn’t let other companies’ fanboy attacks dissuade me from buying a camera that I want. They remind me of those who go to stock car races hoping to see a big crash.
The theoretical demise of Nikon Imaging would be a grave loss for the industry, But again, I am not worried.

Stuart C's picture

It's a funny old world is photography, people buy into a system then become obsessive with that brand, to the point where they actually argue about their chosen companies financial situation (see the similar article on DPreview posted yesterday, 300 comments of bickering and sniping).

I wonder if people pay that much attention to the company finances of other similarly priced items around their house.

Dave Haynie's picture

I would be very nervous if Ryobi was experiencing financial woes and I kept reading articles about the uncertain future of the ONE+ system of tools. It's the system thing!

It might be expensive to replace a TV, a P&S camera, a dishwasher, a corded saw or drill, etc. But it's just that one stand-alone thing. And you're replacing it because it failed or got too old, not because of a failed system of components.

When you have been buying into a system for a decade, perhaps many decades, you have amassed a large number of things that have that single point of vulnerability if the system goes away. If it's a camera system over decades, you have likely spent more than for any single stand-alone consumer item other than a house and perhaps a car. The idea of that system going away is an unusual concern in consumer electronics.

This is also why we tend to become tribal over our system cameras -- that's a big pile of money, and what you spend big, in many folks minds, says a thing about them. This is also why some people do become similarly tribal around their car branding. In the 1980s and 1990s, it was your choice in personal computer (Amiga Forever!). Or, these days, their choice of smartphone.

Stuart C's picture

It’s completely lost on me, I just use what I want to and refrain from trying to push that agenda onto others. I also have zero interest in the financial situation of a company I don’t work for, I like using my camera, if Fujifilm went bankrupt tomorrow that wouldn’t change, and if the time came to have to replace it I would just look elsewhere if their equipment was no longer available.

The actual impact of a camera companies finances are next to zero for the consumer, seeing as most items can be repaired by a 3rd party, or replaced on insurance for an alternative.

Steve Powell's picture

When Fstoppers has articles like this, it’s no wonder it’s considered a poor website.

Terry Poe's picture

The title is totally misleading. Nikon is losing ground? Bullshit.

Actually Nikon's mirrorless strategy and its execution leave Canon behind. I'm a Canon shooter and I envy Nikon's range of affordable mirrorless cameras with a single universal Z-mount. Canon is just not there. R5 and R6 are way overpriced. R6 has subpar resolution of 20 MP. R and RP were obsolete even at their launch. M-mount is dead. Nikon Z5 and Z50 are perfect entrance level Z-mount cameras. Z7 is affordable high resolution camera. Nikon is actually gaining ground.

Ryan Cooper's picture

The title was referring to market share...