Nikon Corporation Business Information, Profile, and History

Company Perspectives:

We are striving to create businesses for the new century that capitalize on our core competencies. We are actively working to expand business by evolving the nanotechnology we have amassed in our experience with steppers and, at the same time, entering into alliances that exceed the framework of our business, establishing new businesses for the twenty-first century centered primarily on the fields of semiconductors, life sciences, and optical communications.

History of Nikon Corporation

While Nikon Corporation is well known in the consumer world for its cameras, the Japanese firm also produces film scanners, telescopes and binoculars, eyeglasses and ophthalmic equipment, microscopes, surveying equipment, precision equipment, and optical equipment. Nikon has also made a name for itself in the semiconductor industry by manufacturing integrated circuit exposure systems, or steppers, that etch circuitry onto wafers. This business segment secures nearly half of company sales, while the imaging products business provides approximately 36 percent of total sales. Operating as a member of the Mitsubishi keiretsu, or business group, Nikon spent 1999 and the early years of 2000 restructuring by adopting an in-house company system as well as an executive officer platform, spinning off various operations, and consolidating its holding companies in both the United States and Europe.

Origins

In 1917, three of Japan's foremost makers of optical equipment merged in order to offer a full line of optical products. The German optical-glass industry was by far the most advanced at the time. The company was called Nippon Kogaku ("Japan Optics") and began producing optical glass in 1918. The new company had negotiated for technical assistance with the German engineering firm Carl Zeiss, but the negotiations fell through. Nevertheless, by 1919 Nippon Kogaku numbered among its employees eight leading, independent German engineers.

World War I had little effect on the new company, and postwar government policies that promoted the importation of foreign technology to develop domestic industry served to assist Nippon Kogaku. In the 1920s, the company used German technical advice to develop a line of ultra-small prism binoculars and the precise JOICO microscope. By 1932, Nippon Kogaku had designed its own camera lenses, the Nikkor brand. Nippon Kogaku was listed on the Tokyo Stock Exchange in 1939.

Nippon Kogaku expanded during the 1920s and 1930s. Military leaders saw expansion as the best way to attack the domestic problems of overpopulation and shortages of raw materials. The country looked to Southeast Asia as its natural extension, and in September 1940 Japan joined Germany and Italy in the Tripartite Pact to secure its interests in this area. As the threat of a major war increased, Japanese government planners chose to concentrate on improving precision optics for navigation and bombing equipment rather than radar and sonar technology, which was used by the U.S. armed forces. The decision meant new business for Nippon Kogaku and its competitor Minolta, both of which were primarily optical-equipment producers at the time. It also increased German technical aid to Japanese firms that were involved in the war effort, and Nippon Kogaku gained expertise through this arrangement.

The company continued to prosper in the postwar years, shifting from optics with military applications to optics with consumer applications. The company produced microscopes, binoculars, eyeglasses, and surveying instruments, which were especially in demand as Japan rebuilt its shattered infrastructure.

Nippon Kogaku Introduces Its First Camera: 1946

After World War II, Nippon Kogaku entered the area for which it would become best known, introducing its first camera in 1946 under the Nikon brand name. Other Japanese firms already had begun selling cameras. Minolta had produced cameras since it was founded in 1928, and Canon produced Japan's first 35-millimeter camera in 1934. However, the standard remained the German Leica 35-millimeter camera, accepted by professional photographers as the top of the line since its introduction in 1925.

The war temporarily took German cameras out of the market place. Although Nippon Kogaku had the advantage of German lens technology and the support of U.S. occupation forces that wanted to rebuild Japanese industry as soon as possible, the company did not immediately take advantage of the lack of competition in international markets. Company management insisted on producing cameras for the Japanese market.

It was not long before Japanese cameras became better known internationally. U.S. occupation forces found Japanese 35-millimeter cameras in post exchanges and took them back to the United States. The simple sand-cast bodies, uncomplicated iris shutters, and high-quality lenses soon earned Japanese cameras an excellent reputation, despite the poor reputation other Japanese-made goods suffered.

Nippon Kogaku's Nikon-brand cameras earned special attention for their high quality. Demand increased further when U.S. combat photographers covering the Korean War favored Nikon lenses, and photojournalists began asking Nippon Kogaku to make special lenses to fit their Leica cameras. The company's reputation spread by word of mouth among professional photographers. By the mid-1960s photographers for Life, National Geographic, and Stern--Germany's largest-selling picture magazine--used Nikon 35-millimeter cameras. Nikon had been accepted as the professional standard, and advanced amateurs followed the example, helping Nikon cameras to make inroads into that market as well.

One reason for Nippon Kogaku's success was its development of a completely new type of camera, the single-lens reflex (SLR) camera. The SLR lets a photographer see exactly what the camera will record, using an angled mirror to reflect images from the camera lens to a viewing screen. The rangefinder camera produced by Leitz, maker of the Leica, used two lenses, one for the film and a separate one for the viewer. That method worked until interchangeable lenses were developed in the 1950s. If a photographer used a wide-angle or telephoto lens, the Leica's viewer lens still showed a standard image. There could be a considerable difference between what the eye saw and what the camera's film recorded.

Nippon Kogaku brought the Nikon F SLR to market in 1959 and improved it when other Japanese companies offered competing models. Leitz did not introduce its SLR until 1964. Leitz's SLR was judged by the professional community to be an amateur model, not advanced enough for professional use. By then, the Nikon camera had become the high-end 35-millimeter standard. Even so, it was cheaper than the competing Leicaflex; in 1965, the Nikon F with a coupled light meter and standard f2 lens sold for $413, while a similarly equipped Leicaflex sold for $549.

Another reason for Nippon Kogaku's success in the international market was its ties to the Mitsubishi keiretsu, its transfer agent. After World War II, the United States had broken up the zaibatsu--powerful Japanese business conglomerates, such as Mitsubishi--but the trading companies, banks, and industrial concerns that had composed the zaibatsu continued to cooperate. For Nippon Kogaku, its ties to Mitsubishi meant ready credit and exporting advantages. Nippon Kogaku also promoted its photographic equipment through what it called "photography culture," sponsoring photo contests and photo exhibits as well as establishing clubs that gave advice to amateur photographers.

Nikon cameras were best-sellers, and Nippon Kogaku was profitable by the mid-1960s. When other major Japanese camera companies, such as Canon and Minolta, entered the office-equipment field by introducing copiers, calculators, and related equipment, Nippon Kogaku continued to emphasize cameras. The company introduced new SLR cameras and an eight-millimeter movie camera during the 1960s and 1970s, as well as a new all-weather camera. The U.S. National Aeronautics and Space Administration chose Nikon SLR cameras for use in the space shuttle program.

Diversification: 1980s

Changing economic conditions in the 1980s forced Nippon Kogaku to reevaluate its reliance on cameras. By 1982, 80 percent of Japanese households owned at least one 35-millimeter camera with all the attachments. Markets in Europe and the United States also were saturated. At the same time, new production techniques--such as use of computers to design lenses--and new materials--such as lightweight, tough plastics for camera bodies--took some of the skill and much of the profit out of making cameras. Since Nippon Kogaku, unlike other Japanese camera makers, was not heavily involved in office equipment or the new video technology, two-thirds of its revenues still came from the mature camera market in 1982.

At the same time, other Japanese companies mounted a new threat to the 35-millimeter camera market. In 1976, Canon introduced a new camera, the impact of which rivaled the introduction of the SLR camera in the 1950s. Canon's AE-I used a semiconductor chip to change automatically some of the settings the photographer would change on traditional 35-millimeter SLR's. Casual photographers often were intimidated by the need to set shutter speed, lens aperture, and focus; thus, when Canon pushed the AE-l's ease of use in an advertising campaign, its sales took off. Encouraged by that success, Canon next brought non-SLR 35-millimeter cameras back into the picture with its simple Snappy. That camera was a threat to the "snapshooter" market firmly held by U.S. camera makers Kodak and Polaroid, not Nippon Kogaku's high end of the market. Nippon Kogaku introduced the FG 35-millimeter SLR, a programmed, automatic model, in mid-1982 and promoted it with a major ad campaign aimed at men who tended to buy SLR's. Nevertheless, Canon was slipping ahead of Nippon Kogaku in overall camera sales. Nippon Kogaku still held its reputation for building better cameras, but its conservative business approach was causing it to lose ground, just as Leitz's had caused it to lose out to Nippon Kogaku 30 years earlier. To survive, Nippon Kogaku not only had to continue camera development but also to diversify.

In the camera field, the company moved into the simpler end of the market with its successful One-Touch camera in 1983. The next year the Nikon FA received the Camera Grand Prix, a Japanese award. The company followed the One-Touch with the Nikon F-501, a new autofocus SLR camera, which received the 1986 European Camera of the Year Award. In 1989, another new autofocus SLR, the Nikon F-801, received both the Camera Grand Prix in Japan and the European Camera of the Year Award. By the beginning of the 1990s, Nikon Corporation--the name Nippon Kogaku had adopted officially in 1988--could claim to have a complete lineup of cameras ranging from professional top-of-the-line models to compact autofocus models for less serious photographers.

Nippon Kogaku had also diversified into areas in which it already had a foothold, including ophthalmic technology. It also produced sunglasses, plastic eyeglass lenses, and eyeglass frames. In 1979, the company marketed its automatic eye refractive index measuring machine. The following year, Nippon Kogaku moved in a new direction, developing a dental root implant using bioactive glass, which bonds with living bone tissue.

In 1972, Nippon Kogaku entered an important new area, marketing its laser interferometric X-Y measuring system, a measuring instrument for integrated circuits. In the 1980s, the company put more effort into developing semiconductor-production machinery, and Nikon became a world leader in that area. Nippon Kogaku continued to develop microscopes, telescopes, and binoculars as well as more advanced equipment for surveying and measuring instruments. It also made its first forays into new types of electronic imaging equipment: a color film scanner, used for computer input of photos and a color printer for computer graphic production. The Still Video Camera System needed no film at all--it recorded images electronically on floppy discs, allowing images to be reproduced immediately or transmitted over telephone lines. Nikon lenses were also being used in new high-definition television.

Nippon Kogaku's 1988 name change to Nikon recognized that optical equipment was no longer the company's focus in the electronics-oriented environment. The company historically known for its advanced optical glass parlayed its reputation as a leading camera maker into success in other fields.

Diversification into various fields, especially the semiconductor market, continued during the 1990s. By the end of the decade, this business segment was securing nearly half of the company's sales. During this time period Nikon also expanded internationally by establishing new subsidiaries in Hungary, Italy, the Czech Republic, Singapore, Taiwan, Sweden, the United States, China, and the United Kingdom.

Some of the company's new product launches during the 1990s included the industry's first underwater autofocus SLR camera, which was introduced in 1992. The following year, the firm developed the world's first electrochromic sunglasses with changing color lenses. Nikon also created a new series of digital cameras, including the Coolpix line, which became available in 1997.

Weakening Market Conditions: Late 1990s and Beyond

During 1998, the company's dependence on the semiconductor industry did not play in its favor. The semiconductor market as a whole weakened due in part to over saturation and falling prices. Nikon posted a net loss of ¥18.2 billion and revenues dropped by 18 percent over the previous year. The sale of steppers picked up in 1999, however, and the firm was able to secure a net profit of ¥7.8 billion ($72.8 million).

During 1999 and into the new century, Nikon restructured itself and adopted an in-house company system to align its group companies and make each one accountable for a certain level of sales and profits. The firm also adopted an executive officer management system, spun off various assets, reorganized its U.S. sales subsidiaries, and created holding company Nikon Holdings Europe B.V. in an effort to consolidate its European businesses. In March 2000, Nikon also launched "Vision Nikon 21," a series of strategic business goals that would extend into the first decade of 2000.

As Nikon streamlined its operations, it was faced with weakening global economies, fierce competition in the manufacturing industry, as well as continued sluggishness in the semiconductor market. Under the leadership of company president Teruo Shimamura, Nikon focused on original product creation along with technological advancements. As part of its new strategy, it entered the chemical mechanical planarization (CMP) or wafer polishing segment of the semiconductor market by partnering with Okamoto Machine Tool Works Ltd. to create a CMP tool, the NPS2301. Nikon also began focusing on increasing its consumer base. As such, it began offering certain cameras to mass merchandisers for the first time. In 2002, the company also launched a television advertising campaign--the first in eight years--for its Coolpix 2500 digital camera.

Nikon's long-term goals included creating a business structure that could weather the changes in the semiconductor industry while increasing profits. Management believed that semiconductors would continue to play a significant role in the development of information technology, which in turn would create demand for its steppers. The company also looked to expand its digital camera product line, its measuring and inspection equipment for semiconductors, and its microscope technologies. Even as market conditions remained challenging, Nikon management felt confident that the company would prosper well into the future. With a long-standing history of success and a highly reputable brand name, Nikon appeared to be on track to meet its long term goals.

Principal Subsidiaries: Mito Nikon Corporation; Zao Nikon Co., Ltd.; Nikon Tec Corporation; Sendai Nikon Corporation; Nikon Photo Products Inc.; Kurobane Nikon Co., Ltd.; Nikon Instech Co., Ltd.; Kogaku Co., Ltd.; Nikon Digital Technologies, Co., Ltd.; Tochigi Nikon Corporation; Sagami Optical Co., Ltd.; Setagaya Industry Co., Ltd.; Nikon Engineering Co., Ltd.; Nikon Geotecs Co., Ltd.; Nikon Eyewear Co., Ltd.; Nikon Optical Shop Co., Ltd.; Nikon Vision Co., Ltd.; Nikon Technologies, Inc.; Nikon Systems Inc.; Nikon Sales-Promotion Co., Ltd.; Nikon Logistics Corporation; Nikon Tsubasa Inc.; Nikon-Essilor Co., Ltd.; Nasu Nikon Co., Ltd.; Aichi Nikon Co., Ltd.; Nikon Americas Inc. (U.S.); Nikon Precision Inc. (U.S.); Nikon Research Corporation of America; Nikon Inc. (U.S.); Nikon Instruments Inc. (U.S.); Nikon Canada Inc.; Nikon Holdings Europe B.V. (Netherlands); Nikon Precision Taiwan Ltd.; Nikon Precision Singapore Pte Ltd.; Nikon (Malaysia) Sdn. Bhd.; Nikon Hong Kong Ltd.; Nikon (Thailand) Co., Ltd.; Nanjing Nikon Jiangnan Optical Instrument Co., Ltd. (China); Beijing Nikon Ophthalmic Products Co., Ltd. (China).

Principal Competitors: ASML Holding N.V.; Canon Inc.; Fuji Photo Film Co. Ltd.

Chronology

• Key Dates:
• 1917: Three of Japan's optical equipment manufacturers merge to form Nippon Kogaku.
• 1932: By now the firm has launched camera lenses under the brand name Nikkor.
• 1939: Nippon Kogaku lists on the Tokyo Stock Exchange.
• 1946: The company introduces its first Nikon brand camera.
• 1959: The Nikon F SLR camera is launched.
• 1972: The firm enters the semiconductor industry with a measuring instrument for integrated circuits.
• 1988: The company officially adopts the name Nikon Corporation.
• 1992: Nikon launches the world's first underwater SLR camera.
• 1998: As the semiconductor market falters, the firm reports a loss of ¥18.2 billion.
• 2000: Nikon management launches the "Vision Nikon 21" strategy.