*NEWS*CANON TO RAISE INKJET OUTPUT IN 06

[Anonymous]

Canon to raise inkjet printer output in 2006

TOKYO,March 05-Japanese office equipment giant Canon
Inc.  plans to boost production of inkjet printers by over 20 percent next year
and may build another printer factory in Vietnam, a company director said on
Monday.

Katsuichi Shimizu, chief executive in charge of inkjet
product operations, said that Canon would lift output to about 22 million units
in 2006 from an estimated 18 million this year, aiming to meet rising demand and
increase its market share.

“The overall market will continue to expand … but it is
up to each manufacturer to determine its own rate of growth. It all comes down
to making better products at a lower cost,” Shimizu told Reuters in an
interview.

Canon, the world’s third-largest inkjet printer firm after
U.S.-based Hewlett-Packard Co. and Japanese rival Seiko Epson Corp.
<6724.T>, would produce the extra output at facilities in Thailand and
Vietnam, Shimizu said.

He also revealed that Canon, which is scheduled to start
operations at a new $100 million factory in Vietnam in June, was considering
building another factory or expanding existing facilities in the country in the
next few years.

“This would probably happen within three years,” Shimizu
said, explaining that some production of middle-end printers could be shifted
from Thailand, freeing up space at its Thai facilities to increase output of
high-end machines.

“It would basically be low-end and middle-end printers in
Vietnam and middle-end and high-end models in Thailand,” he said.

Canon secured 44 percent of the domestic inkjet market in
2004, grabbing the top spot from rival Seiko Epson for the first time in eight
years, according to research firm Gartner Japan. Seiko Epson held a 41 percent
share in unit terms.

But Canon has been less successful in other big markets
such as Europe and the United States, partly because it has had a relatively
weak lineup of multi-function printers (MFP), which unlike single-function
models can also copy and scan.

MFPs account for more than half of all printers sold in the
United States, compared with 34 percent in Japan last year.

“We will launch a lot of MFPs this year,” Shimizu said.

PROFIT ADVANTAGE

According to Gartner, Canon held a 16 percent share of the
global inkjet printer market of 85.14 million units in 2004, behind HP at 40
percent and Seiko Epson at 21 percent but ahead of fourth-biggest Lexmark
International Inc. .

But Shimizu said Canon had the advantage when it came to
profitability because it makes a higher percentage of its own key components
such as inkjet heads. This allows it to add value to its products and lower
procurement costs.

Shimizu also noted that Canon was now manufacturing all its
own printers. It had outsourced the production of some MFPs to another firm but
had recently brought that back in-house.

“The value-added element of our earnings structure is far
superior to our competitors,” Shimizu said. “Our profit margins are even larger
than stock analysts estimate.”

Canon does not give a breakdown for its inkjet printers,
but JP Morgan analyst Hisashi Moriyama estimates the division had an operating
profit margin of about 17 percent last year. Seiko Epson’s printer unit produced
a margin of roughly 5 percent in the previous business year.

“Canon is more focused on profitability than on raising its
market share,” Moriyama said. “Canon doesn’t mind if they are slow to launch
products. They have a pattern of coming into the market late but with a strong
earnings structure in place.”

Even so, Shimizu said there were some worrisome factors at
play. He said competition was forcing makers to slash prices and warned that the
rising cost of plastic and raw materials was making it harder to further lower
production costs.

He also said that Because the structure of the inkjet
printer had reached a very mature stage technologically, it was increasingly
difficult to find new ways to design and produce mechanical parts like the paper
feeder more efficiently.

Shares of Canon Ended Monday down 0.71 percent at 5,580
yen, in line with the benchmark Nikkei average , which fell 0.62 percent.

[Author]

March 15, 2005 at 9:53 AM