*NEWS*CANON TO BUILD ANOTHER TONER PLANT
*NEWS*CANON TO BUILD ANOTHER TONER PLANT
2005-06-20 at 10:30:00 am #11605
Canon to invest 80 bln yen on Japan plant
Jun.2005 – Canon Inc.
the world’s top maker of copiers and laser printers, said on Friday it would invest 80 billion yen ($734 million) in a new factory in southwestern Japan to boost output of ink and toner cartridges.
Canon, which competes with the likes of Ricoh Co. and Xerox in copiers and Seiko Epson Corp. in printers, said it would begin construction of the plant in Oita prefecture in March 2006 and start production in January 2007.
Like other office equipment makers, Canon gets the lion’s share of its profits from ink, cartridges and other consumables that must be replaced periodically and provide a steady stream of income long after the initial sale of the machine.
Canon has enjoyed strong demand for consumables thanks to a large installed base of machines. It controls nearly 30 percent of the global copier market and more than half the laser printer market including output supplied to Hewlett-Packard Co., and it is one of the top makers of inkjet printers.
“Sales of our consumables have been on an uptrend in the past few years, and it is imperative that we take action now to meet what we expect to be strong future demand,” Canon President Fujio Mitarai told a press conference in Oita.
The investment is one of Canon’s largest in recent history, coming in just below the 90 billion yen it has earmarked for a new domestic plant with partner Toshiba Corp. for the production of surface conduction electron emitter displays.
It also underscores Canon’s commitment to keeping 60 percent of its total production in Japan. This is in contrast to many of its rivals, which have been looking to become more efficient by shifting production to China and elsewhere.
Mitarai said lower wages in China and other countries were not as important with consumables because they are capital-intensive. Producing in Japan also makes it easier to prevent key technologies from leaking to rival firms.
Oita, where Mitarai was born in 1935, is also seen as a good place for a factory because of its ample water supply, which is necessary for producing ink, and proximity to China, South Korea and other fast-growing Asian markets.
Mitarai said his desire to prevent a further “hollowing-out” of Japan’s manufacturing sector was also behind the move.
“I want to keep as many jobs as I can in Japan,” he said.
Canon said the factory would employ about 1,100 workers and use machines to automate the assembly process, in line with its plan to fully automate 25 percent of its overall domestic production by the end of 2007 to lower manufacturing costs.
The Tokyo-based company plans to produce ink and toner as well as the cartridges at the factory, allowing it to integrate the entire manufacturing process, which should shorten lead times and lead to lower shipping costs.
“Of course a factory with no people is ideal, but we will need some employees,” Mitarai said. “Consumables require constant innovation and it makes sense for us to boost production in Japan where we have our core research strengths.”
Canon said the new factory would be able to produce about 100 million ink jet cartridges in 2008, giving it a total output of 400 million units including expected levels of production at two other domestic plants.
Its output will be about 250 million units in 2005, but it plans to raise that to 300 million over the next two years. Canon does not disclose its output of toner cartridges, which are used in both copiers and laser beam printers.
Investors have been waiting to see how Canon will use a growing cash pile that is expected to top 1 trillion yen this year with the company forecasting group net profit will rise 7 percent to a record 367 billion yen.
Mitarai reiterated plans to build a production line in Oita for complementary metal oxide semiconductor (CMOS) image sensors used in digital cameras, but said details on timing and cost had not yet been hammered out.
Friday’s news conference in Oita came just two months after Canon held an opening ceremony for a new digital camera factory in Oita, which is located about 800 kilometers (500 miles) south of Tokyo on Japan’s southernmost main island of Kyushu.
The new consumables factory will be built on 400,000 square meters of land adjacent to the digital camera plant.
Mitarai was flanked by the Oita City mayor and Oita prefecture governor during the press conference. Both expressed hope the new factory would boost the local economy.
“When Canon held the ceremony in April I told them that there was some open space next to the plant, but I was surprised that a decision was made this quickly,” Oita Governor Katsusada Hirose said with a laugh. “It is like one big present.”
Shares in Canon closed up 0.2 percent at 5,890 yen, while the Nikkei average rose 0.86 percent